Root Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land and labor are cheap, and competition among developers is fierce. The homes are a standard model, with any upgrades added by the buyer after the sale. Root Builders' costs per developed sublot are as follows: (Click the icon to view the costs.) Root Builders would like to earn a profit of 16% of the variable cost of each home sold. Similar homes offered by competing builders sell for $209,000 each. Assume the company has no fixed costs. Read the requirements. Begin by calculating the target cost. Market price of similiar homes $ 209,000 Less: Desired profit 30,400 Target full cost per home $ 178,600 fall short of Given the current market price and Root's current variable costs, the company will The company's profit will the target by $ not be able to achieve its desired profit. 11,400 per home sale. Requirement 3. Bathrooms and kitchens are typically the most important selling features of a home. Root Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $30,000 per home but would enable Root Builders to increase the sales prices by $52,500 per home. (Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If Root 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. 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 Cost-plus price per home Data table Land Construction Landscaping EA $ 58,000 120,000 10,000 Variable selling costs 2,000 Print Done