25-12 Making pricing decisions Learning Objective 2 on Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Atlanta. L and and labor are cheap, and competition among developers is fierce. The homes are a standard model, with any upgrades added by the buyer after the sale. Johnson Builders's costs per developed sublot are as follows: 3. Desired profit $28,840 Land Construction Landscaping Variable selling costs 50,000 123,000 9,000 8,000 Johnson Builders would like to earn a profit of 14% of the variable cost of each home sold. Similar homes offered by competing builders sell for $207,000 each. Assume the company has no fixed costs. Requirements 1. Which approach to pricing should Johnson Builders emphasize? Why? 2. Will Johnson Builders be able to achieve its target profit levels? 3. Bathrooms and kitchens are typically the most important selling features of a home. Johnson Builders could differentiate the homes by upgrading the bath- rooms and kitchens. The upgrades would cost $16,000 per home but would enable Johnson Builders to increase the sales prices by $28,000 per home