Question

1Data Table $ 56,000 120,000 4,000 9,000 Land Construction Landscaping Variable selling costs PrintDone Ste barr Builders builds 1 500-square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land and labor are Steinbarr Bulders would like earn a profit of 16% of the variable cost of each home sold. Similar homes offered by cheap, and competition among developers is fierce. The homes are a standard model, with any upgrades added by thecompeting builders sell for $205,000 each. Asume the company has no fxed costs. buyer after the sale. Steinbarr Buikders's costs per developed sublot are as follows EEB (Click the icon to view the costs.) Read the requirements. Requirement 1. Which approach to pricing should Steinbarm Builders emphasize? Why? Vapproach to pricing because they are control over pricing because the tract homes are Steinbarr Builders will need to emphasize a This means Steinbarr wil stiff Requirement 2. Will Steinbarr Builders be able to achieve its target profit levels? Begin by caculating the target cost Market price of similiar homes Less: Desired profit Target full cost per home Given the current market price and Steinbarr's current variable costs, the company will The company's profit will to achieve its desired profit. the target by $ per home sale Requirement 3. Bathrooms and kitchens are typically the most important selling features of a home. Steinbarr Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $25,000 per home but would enable Steinbarr Builders to increase the sales prices by $43,750 per home. K chen and bathroom upgrades typically add about 175% o ther cost to the value o any home Steinbarr Builders makes the upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Calculate the new cost-plus price per home. Current variable cost per home Plus: Variable cost af kitchen and bathroom upgrade per home Total variable cost per home Plus: Desired profit per home Cost-plus price per home Should the company differentiate its product in this manner? The new cost-plus price per home, with bath and kitchen upgrades, is actually profit. Steinbarr ▼ the expected market price of an upgraded house. If Steinbarr can sell the upgraded homes for S248, 750, as expected, he wi eam his desired Vupgrade the bathrooms and kitchens so that he has control over pricing.

Answer 1

Answer:-

Part 1
Target-Costing
not unique
Have not much
no unique and face
Part 2
Market price of similar Homes		$205,000
Less: Desired Profit		$ -30,240
($56,000+$120,000+$4,000+$9,000)*16%
Target Full cost per home		$174,760
not be able
fall short
$189,000-$174,760	$ 14,240
Part 3
Current Variable cost per home		$189,000
Add: Upgrage variable Cost		$ 25,000
Total Variable Cost per home		$214,000
Add: Desired Profit ($216,000*16%)		$ 34,240
Cost plus price per home		$248,240
lower than
more than
Should
more

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