Dominic 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 "cookie$-$cutter," with any upgrades

added by the buyer after the sale. Dominic Builders' cost

per developed sublot are as follows:

$($Click the icon to view the costs.$)$

Dominic Builders would like to earn a profit of

$14\%$ of the variable cost of each home sale.

Similar homes offered by competing builders sel

for $$202,000$ each.

Read the

Dominic will need to emphasize a target$-$costing approach to pricing. Because the tract homes are

not unique and face stiff competition, Dominic will not have much control over pricing.

Requirement $2.$ Will Dominic Builders be able to achieve its target profit levels? Show your computations.

Complete the following table to show whether Dominic Builders will be able to achieve their target profit levels. $($Use

parentheses or a minus sign to indicate a profit shortfall.$)$

Less:

Target cost per home

Less:

Expected excess profit $($profit shortfall$)$

Requirements

Which approach to pricing should Dominic Builders emphasize? Why?

Will Dominic Builders be able to achieve its target profit levels? Show your computations.

Bathrooms and kitchens are typically the most important selling features of a home. Dominic

Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would

cost $$20,000$ per home but would enable the company to increase the selling prices by $$35,000$

per home $($in general, kitchen and bathroom upgrades typically add at least $150\%$ of their cost to

the value of any home.$)$ If Dominic Builders upgrades, what will the new cost$-$plus price per

home be$?$ Should the company differentiate its product in this manner? Show your analysis.

Data table