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 $14\%$ 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.

Requirement $1.$ Which approach to pricing should Root Builders emphasize? Why?

Root Builders will need to emphasize a

approach to pricing because they are

Requirements

Which approach to pricing should Root Builders emphasize? Why?

Will Root Builders be able to achieve its target profit levels?

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 $$12,000$ per home but would enable Root Builders to increase the sales prices by

$$21,000$ 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

Data table

per home be$?$ Should the company differentiate its product in this manner?