Steinbarr Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land and labor are Steinbarr Builders would like to earn a profit of 14 % of the variable cost competing builders sell for $205,000 each. Assume the company has no fixed costs. each home sold. Similar homes offered by cheap, and competibon among developers is fierce. The homes are a standard model, with any upgrades added by the s costs per developed su follows: are Read the requirements Cm (Click the icon to view the costs.) Requirement 1. Which approach to pricing should Steinbarr Builders emphasize? Why? approach to pricing because they are control over pricing because the tract homes are stiff Steinbarr Builders will need emphasize a This means Steinbarr will competition Requirement 2. Will Steinbarr 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 to achieve its desired profit Given the current market price and Steinbarr's current variable costs, the company will the target by $ per home sale. The company's profit will Requirement 3. Bathrooms and kitchens are typically the most important selling features of a home. Steinbarr Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $26,000 per home but cost-plus price per home be? Should the company dferentiate ite neoduct in thie mone and bathroom upgrades typically add about 175 % of their cost to the value of any home.) If Steinbarr Builders makes the upgrades, what will the new Calculate the new cost-plus price per home. Current variable cost per home Plus: Variable cost of kitchen and bathroom upgrade per home Tatal uarishlo enet nor homo would enable Steinbarr Builders to increase the sales prices by $45,500 per home, (Kitchen and bathroom upgrades typically add about 175 % of their cost to the value of any home.) If Steinbarr Builders makes the uparades, 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 Should the company differentiate product in this manner? the expected market price of an upgraded house. If Steinbarr can sell the upgraded homes for $250,500, as expected, his The new cost-plus price per home, with bath and kitchen upgrades, actually will earn control over pricing. upgrade the bathrooms and kitchens so that he has desired profit. Steinbar ill Data Table per upgrading th st to the valu ures of a Kitchen nner? $ 51,000 Land Construction 124,000 Landscaping 12,000 Variable selling costs 1,000 Print Done X
