90.2K

Verified Solution

Link Copied!

Please answer all three parts

Baxter Builders builds townhomes in a new subdivision just outside of Saskatoon. Land and labour are cheap, and competition among developers is fierce. The homes in the subdivision are identical to one another, but buyers can upgrade features by paying the difference. Baxter Builders' cost per developed sublot are as follows: (Click the icon to view the costs.) Baxter Builders would like to earn a profit of 15% of the variable cost of each home sale. Similar homes offered by competing builders sell for $205,000 each. Costs 1. Which approach to pricing should Baxter Builders emphasize? Why? 2. Will Baxter Builders be able to achieve its target profit levels? Show your computations. 3. Bathrooms and kitchens are typically the most important selling features of a home. Baxter Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $17,000 per home but would enable Baxter Builders to increase the selling prices by $32,300 per home. (In general, kitchen and bathroom upgrades typically add at least 150% of their cost to the value of any home.) If Baxter Builders upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Show your analysis

Answer & Explanation Solved by verified expert

See Answer