Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Preston Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Hartford. Land and labor are cheap, and competition among developers is fierce.

image text in transcribedimage text in transcribedimage text in transcribed

Preston Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Hartford. 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. Preston Builders' cost per developed sublot are as follows: (Click the icon to view the costs) Preston Builders would like to eam a profit of 14% of the variable cost of each home sale Similar homes offered by competing builders sell for $200,000 each. Read the requirements Requirement 1. Which approach to pricing should Preston Builders emphasize? Why? Preston will need to emphasize a target-costing approach to pricing. Because the tract homes are not unique and face stiff competition, Preston will not have much control over pricing Requirement 2. Will Preston Builders be able to achieve its target profit levels? Show your computations Complete the following table to show whether Preston 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: Less Desired profit Target cost per home Less Actual current variable cost Expected excess profit (profit shortfall)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Reporting & Analysis Using Financial Accounting Information

Authors: Charles H. Gibson

11th edition

324657420, 978-0324657425

More Books

Students also viewed these Accounting questions