3. Bathrooms and kitchens are typically the most important selling features of a home. McKee Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $30,000 per home but would enable Mckee Builders to increase the sales prices by $52,500 per home. (Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If McKee Builders makes the upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? McKee 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 $205,000 each. Assume the company has no fixed costs. Land $ 52,000 Construction 128,000 3,000 Landscaping Variable selling costs 5,000 Requirement 3. Bathrooms and kitchens are typically the most important selling features of a home. McKee Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $30,000 per home but would enable McKee Builders to increase the sales prices by $52,500 per home. (Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If McKee 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 of kitchen and bathroom upgrade per home Total variable cost per home IT Plus: Desired profit per home Cost-plus price per home