= Homework: Chapter 8 Homework (Sp 22) Question 2, E8-21A (similar to) Part 2 of 5 HW Score: 18.59%, 1.12 of 6 points Points: 0.12 of 1 Save Gildea Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Boston. Land and labor are cheap, and competition among developers is fierce. The homes are "cookie-cutter," with any upgrades added by the buyer after the sale. Gildea Builders' cost per developed sublot are as follows: (Click the icon to view the costs.) Gildea Builders would like to earn a profit of 14% of the variable cost of each home sale. Similar homes offered by competing builders sell for $201,000 each Read the requirements Requirement 1. Which approach to pricing should Gildea Builders emphasize? Why? Gildea will need to emphasize a target-costing approach to pricing. Because the tract homes are not unique and face stiff competition, Gildea will not have much control over pricing. Data table Requirement 2. Will Gildea Builders be able to achieve its target profit levels? Show your computations. Complete the following table to show whether Gildea Builders will be able to achieve their target profit levels. (Use parentheses or a minus sign to indicate a profit shortfall.) Desired profit Less Land. 53,000 Construction. $ 122,000 Landscaping $ 6,000 Variable marketing costs ...... $ 1,000 Target cost per home Requirements Less: Expected excess profit (profit shortfall) Print Done 1. Which approach to pricing should Gildea Builders emphasize? Why? 2. Will Gildea Builders be able to achieve its target profit levels? Show your computations 3. Bathrooms and kitchens are typically the most important selling features of a home. Gildea Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $24,000 per home but would enable the company to increase the selling prices by $42,000 per home in general, kitchen and bathroom upgrades typically add at least 150% of their cost to the value of any home.) If Gildea Builders upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Show your analysis. Print Done