Rouse 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. Rouse Builders' cost per developed sublot are as follows:

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

Rouse 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 $$200,000$ each.

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

Rouse will need to emphasize a $$ approach to pricing. Because the tract homes are not unique and face $$ stiff competition, Rouse will $$ control over pricing.

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

Complete the following table to show whether Rouse 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 Rouse Builders emphasize? Why?

Will Rouse 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. Rouse Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $$22,000$ per home but would enable the company to increase the selling prices by $$38,500$ per home $($in general, kitchen and bathroom upgrades typically add at least $150\%$ of their

$Ge$

$$

$q,$

$$

$$ cost to the value of any home.$)$ If Rouse 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

$\backslash$table$[[$Land$...................,52,000],[$Construction$.....,120,000],[$Landscaping$....................$ $$,5,000],[$Variable marketing costs $.......$ $$,2,000]]$