Johnson Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Boise. 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. Johnson Builders' cost per developed sublot are as follows: (Click the icon to view the costs.) ---- Johnson Builders would like to earn a profit of 15% of the variable cost of each home sale. Similar homes offered by competing builders sell for $207,000 each. Read the requirements. Requirement 1. Which approach to pricing should Johnson Builders emphasize? Why? Johnson will need to emphasize a target-costing approach to pricing. Because the tract homes are not unique and face Requirement 2. Will Johnson Builders be able to achieve its target profit levels? Show your computations. stiff competition, Johnson will not have much control over pricing. Complete the following table to show whether Johnson Builders will be able to achieve their target profit levels. (Use parentheses or a minus sign to indicate a profit shortfall.) Revenue at market price 207000 Less: Desired profit 27900 Target cost per home 179100 Less: Actual current variable cost 186000 Expected excess profit (profit shortfall) 6900 Data table Land. $ 53,000 Construction.. $ 121,000 Landscaping... $ 9,000 Variable marketing costs $ 3,000 Requirements - 1. Which approach to pricing should Johnson Builders emphasize? Why? 2. Will Johnson 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. Johnson Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $30,000 per home but would enable the company to increase the selling prices by $52,500 per home (in general, kitchen and bathroom upgrades typically add at least 150% of their cost to the value of any home.) If Johnson 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