Question 2, EM8-12 (sim. Homework: M 8 Homework B Graded Part 3 of 5 HW score: 72.81%, 26.21 ot36 points points: 221 Of6 Save 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.) 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. Requirement 2. Will Bennett Builders be able to achieve its target profit levels? Begin by calculating the target cost. Bennett Builders would like to earn a profit of 16% of the variable cost of each home sold. Similar homes offered by competing builders sell for $204,000 each Assume the company has no fixed costs. Read the Leguirements_ This means Bennett will not have much control over pricing because the tract homes are not unique and face stiff competition. Market price of similiar homes Less: Desired profit Target full cost per home s 204,000 30,240 s 173,760 Given the current market price and Bennett's current variable costs, the company will not be able to achieve its desired profit The company's profit will Data table Land Construction Landscaping Variable selling costs print per home sale Requirements 1. Which approach to pricing should Bennett Builders emphasize? Why7 2 Will Bennett Builders be able to achieve its target profit levels? 53,000 128,000 5,000 3,000 Done help 3. Bathrooms and kitchens are typically the most important selling features of a home. Bennett Builders could differentiate the homes by upgrading the bathrooms and kitchens The upgrades would cost $28,000 per home but would enable Bennett Builders to increase the sales prices by $49,000 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