Oppen Builders builds townhomes in a new subdivision just outside of Crescent Bay. Land and labour are cheap, and competition among developers is fierce. The homes in the subdivision are identical to one another, but buyers can upgrade features by paying the difference. Oppen Builders' cost per developed sublot are as follows: E: (Click the icon to view the costs.) Oppen 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 $204,000 each. Requirements * Requirements Requirement 1. Which approach to pricing should Oppen Builders emphasize? Why? Oppen will need to emphasize a target-costing approach to pricing. Because the tract homes are stiff competition, Oppen will control over pricing. Requirement 2. Will Oppen Builders be able to achieve its target profit levels? Show your computations. Complete the following table to show whether Oppen Builders will be able to achieve their target profit levels. (Use parentheses or a minus sign to indicate a profit shortfall.) 1. Which approach to pricing should Oppen Builders emphasize? Why? 2. Will Oppen 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. Oppen Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $24,000 per home but would enable Oppen Builders 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 Oppen Builders upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Show your analysis. Less: Target costs Vs: Print Done Expected excess profit (profit shortfall) Given the current market price and Oppen's current variable costs, he will V to achieve his target profit. His profit will by $ per home sale. Requirement 3. Bathrooms and kitchens are typically the most important selling features of a home. Oppen Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $24,000 per home but would enable Oppen Builders 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 Oppen Builders upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Show your analysis. Compute the new cost-plus price per home. Plus: Total variable costs Plus: Cost-plus price the expected market price of an upgraded house. If Oppen can sell the upgraded homes for $246,000, as expected, he will earn his target profit. Oppen upgrade the bathrooms and kitchens so that he has The new cost-plus price, with bath and kitchen upgrades, is actually over pricing control 0 Data Table Land........... Construction......... Landscaping Variable marketing costs ........$ $ ....$ .......$ 50,000 122,000 6,000 3,000 Print Done Oppen Builders builds townhomes in a new subdivision just outside of Crescent Bay. Land and labour are cheap, and competition among developers is fierce. The homes in the subdivision are identical to one another, but buyers can upgrade features by paying the difference. Oppen Builders' cost per developed sublot are as follows: E: (Click the icon to view the costs.) Oppen 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 $204,000 each. Requirements * Requirements Requirement 1. Which approach to pricing should Oppen Builders emphasize? Why? Oppen will need to emphasize a target-costing approach to pricing. Because the tract homes are stiff competition, Oppen will control over pricing. Requirement 2. Will Oppen Builders be able to achieve its target profit levels? Show your computations. Complete the following table to show whether Oppen Builders will be able to achieve their target profit levels. (Use parentheses or a minus sign to indicate a profit shortfall.) 1. Which approach to pricing should Oppen Builders emphasize? Why? 2. Will Oppen 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. Oppen Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $24,000 per home but would enable Oppen Builders 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 Oppen Builders upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Show your analysis. Less: Target costs Vs: Print Done Expected excess profit (profit shortfall) Given the current market price and Oppen's current variable costs, he will V to achieve his target profit. His profit will by $ per home sale. Requirement 3. Bathrooms and kitchens are typically the most important selling features of a home. Oppen Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $24,000 per home but would enable Oppen Builders 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 Oppen Builders upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Show your analysis. Compute the new cost-plus price per home. Plus: Total variable costs Plus: Cost-plus price the expected market price of an upgraded house. If Oppen can sell the upgraded homes for $246,000, as expected, he will earn his target profit. Oppen upgrade the bathrooms and kitchens so that he has The new cost-plus price, with bath and kitchen upgrades, is actually over pricing control 0 Data Table Land........... Construction......... Landscaping Variable marketing costs ........$ $ ....$ .......$ 50,000 122,000 6,000 3,000 Print Done