Bennett Builders builds 1,500-square-foot starter tract homes Bennett Builders would like to earn a profit of 14% of the in the fast-growing suburbs of Boise Land and labor are the variable cost of each home sale. Similar homes offered by and competition among developers is fierce.

  

Transcribed Image Text:

Bennett Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Boise. 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. Bennett Builders' cost per developed sublot are as follows: Bennett 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 $205,000 each. Read the requirements- E (Click the icon to view the costs.) Requirement 1. Which approach to pricing should Bennett Builders emphasize? Why? Bennett will need to emphasize a target-costing approach to pricing. Because the tract homes are not unique and face stiff competition, Bennett will not have much control over pricing Requirement 2. Will Bennett Builders be able to achieve its target profit levels? Show your computations. Complete the following table to show whether Bennett 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 205,000 Less: Desired profit Target cost per home Less: Actual current variable cost 192,000 Expected excess profit (profit shortfall) Bennett Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Boise. 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. Bennett Builders' cost per developed sublot are as follows: Bennett 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 $205,000 each. Read the requirements- E (Click the icon to view the costs.) Requirement 1. Which approach to pricing should Bennett Builders emphasize? Why? Bennett will need to emphasize a target-costing approach to pricing. Because the tract homes are not unique and face stiff competition, Bennett will not have much control over pricing Requirement 2. Will Bennett Builders be able to achieve its target profit levels? Show your computations. Complete the following table to show whether Bennett 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 205,000 Less: Desired profit Target cost per home Less: Actual current variable cost 192,000 Expected excess profit (profit shortfall)

Answer rating: 100% (QA)

Answer Requirement 1 Bennett will need to emphasize a Targetcosting approach to pricing ... View the full answer