Bennett Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land 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. Bennett Builders' costs per developed sublot are as follows: (Click the icon to view the costs.) Bennett 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 S204,000 each. Assume the company has no fixed costs. Read the requirements - Requirement 1. Which approach to pricing should Bennett Builders emphasize? Why? Bennett Builders will need to emphasize a target-costing approach to pricing because they are price-takers. This means Bennett will not have much control over pricing because the tract homes are not unique and face stiff competition. Requirement 2. Will Bennett Builders be able to achieve its target profit levels? Begin by calculating the target cost. Data table Requirements Market price of similiar homes Less: Desired profit Target full cost per home 1. Which approach to pricing should Bennett Builders emphasize? Why? Land 56,000 2. Will Bennett Builders be able to achieve its target profit levels? Construction 120,000 3. Bathrooms and kitchens are typically the most important selling features of a home. Bennett Landscaping 6,000 Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $14,000 per home but would enable Bennett Builders to increase the sales prices by Variable selling costs 3,000 $24,500 per home. (Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If Bennett Builders makes the upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? $ Print Done Print Done