kyler Builders builds 1,500-square-foot starter tract homes in the fast-growing Kyler Builders would like to earn a profit of 16% of the variable cost of each home suburbs of Atlanta, Land and labor are cheap, and competition among developers sold. Similar homes offered by competing builders sell for $208,000 each. Assume is fierce. The homes are a standard model, with any upgrades added by the buyer the company has no fixed costs. after the sale. Kyler Builders's costs per developed sublot are as follows: Click the icon to view the costs.) Read the requirements i Data Table Land $ 59,000 Construction 121,000 Landscaping 5,000 Variable selling costs 1,000 Print Done .X i Requirements 1. Which approach to pricing should Kyler Builders emphasize? Why? 2. Will Kyler Builders be able to achieve its target profit levels? 3. Bathrooms and kitchens are typically the most important selling features of a home. Kyler Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $24,000 per home but would enable Kyler Builders to increase the sales prices by $42,000 per home. (Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If Kyler 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 pr PAHANG VERGE This means Kyler will V control over Requirement 1. Which approach to pricing should Kyler Builders emphasize? Why? Kyler Builders will need to emphasize a approach to pricing because they are pricing because the tract homes are stiff competition Requirement 2. Will Kyler Builders be able to achieve its target profit levels? Begin by calculating the target cost. Market price of similiar homes Less: Desired profit Target full cost per home les esc Given the current market price and Kyler's current variable costs, the company will The company's profit will the target by $ to achieve its desired pront. per home sale e sco This means Kyler will control over Requirement 1. Which approach to pricing should Kyler Builders emphasize? Why? Kyler Builders will need to emphasize a approach to pricing because they are pricing because the tract homes are tiff competition cost-plus Requirement 2. Will Kyler Builders be a profit levels? target-costing Begin by calculating the target cost. Market price of similiar homes Less: Desired profit Target full cost per home es esc esco Given the current market price and Kylor's current variable costs, the company will The company's profit will the target by $ to achieve its desired profit. per home sale escor Requirement 1. Which approach to pricing should Kyler Builders emphasize? Why? Kyler Builders will need to emphasize a approach to pricing because they are pricing because the tract homes are stiff competition This means Kyler will Y control over es price-setters price-takers. esc Requirement 2. Wil Kyler Builders be able to achieve its target profit levels? Begin by calculating the target cost. Market price of similiar homes Less: Desired profit Target full cost per home e sce Given the current market price and Kyler's current variable costs, the company will The company's profit will the target by $ to achieve its desired profit per home sale e scor This means Kyler will control over have significant Requirement 1. Which approach to pricing should Kyler Builders emphasize? Why? Kyler Builders will need to emphasize a approach to pricing because they are pricing because the tract homes are stiff competition Requirement 2. Will Kyer Builders be able to achieve its target profit levels? Begin by calculating the target cost. Market price of similiar homes Less: Desired profit Target full cost per home not have much les esc Given the current market price and Kyler's current variable costs, the company will The company's profit will the target by $ to achieve its desired profit per home sale. le sco This means Kyler will control over Requirement 1. Which approach to pricing should Kyler Builders emphasize? Why? Kyler Builders will need to emphasize a approach to pricing because they are pricing because the tract homes are stiff competition Requirement 2. Wil Kyler Builders b levels? not unique and face Begin by calculating the target cost. unique and do not face Market price of similar homes Less: Desired profit Target full cost per home es Given the current market price and Kyler's current variable costs, the company will The company's proft wil the target by $ to achieve its desired profit per home sale e sc Requirement 3. Bathrooms and kitchens are typically the most important selling features of a home, Kyler Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $24,000 per home but would enable Kyler Builders to increase the sales prices by $42,000 per home. (Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If Kylor 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. le Current variable cost per home Plus: Variable cost of kitchen and bathroom upgrade per home Total variable cost per home Plus: Desired profit per home e sc esce Cout.plus price per homo le sca Should the company differentiate its product in this manner? The new cost-plus price per home, with bath and kitchen upgrades, is actually V the expected market price of an upgraded house. If Kyler can sell the upgraded homes for $250,000, as expected, he will earn his desired profit. Kylor upgrade the bathrooms and kitchens so that he has control over pricing
