Question

Gorrells and Sunn builds high-quality homes ranging in price from $200,000 to $1,000,000. John Ellis, a local physician, has asked Gorrells and Sunn to show him some house plans. Dr. Ellis has selected a plan that calls for $300,000 in building materials,$180,000 in labor, and $40,000 in add-ons, but he doesn’t want to pay more than $575,000 for his home. Gorrells and Sunn typically prices its homes based on the total cost of construction plus 15%.

What price would Gorrells and Sunn normally quote for this house plan?

Quoted price

$

What is the target cost Gorrells and Sunn would need to meet to sell the house for $575,000 at a 15% markup? (Round answers to the nearest whole dollar, e.g. 5,275.)

Target cost

$

Answer 1

Building materials = $300,000

Labor = $180,000

Add-ons = $40,00

Total cost = Building materials + Labor + Add-ons

= 300,000+180,000+40,000

= $520,000

Markup = 15% of total cost

= 520,000 x 15%

= $78,000

Quoted price = Total cost + Markup

= 520,000+78,000

= 598,000

Quoted price

$598,000

Selling price = $575,000

Markup = 15%

Target cost = ?

Mark up = Target cost x 15%

= 0.15 target cost

Target cost + Mark up = Selling price

Target cost + 0.15 target cost = 575,000

1.15 target cost = 575,000

Target cost = $500,000

Target cost

$500,000

Kindly comment if you need further assistance. Thanks‼!