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Steinbarr 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. Steinbar Builders' costs per developed sublot are as follows:

Steinbarr 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 $$206,000$ each. Assume the company has no fixed costs.

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

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

Steinbarr Builders will need to emphasize a $$ approach to pricing because they are $$ This means Steinbarr will $$ control over pricing because the tract homes are $$ stiff competition.

Data table

$\backslash$table$[[$Land$,56,000],[$Construction$,120,000],[$Landscaping$,4,000],[$Variable selling costs,$7,000]]$

Tequirements

Which approach to pricing should Steinbarr Builders emphasize? Why?

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

Bathrooms and kitchens are typically the most important selling features of a home. Steinbarr Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $$26,000$ per home but would enable Steinbarr Builders to increase the sales prices by $$45,500$ per home. $($Kitchen and bathroom upgrades typically add about $175\%$ of their cost to the value of any home.$)$ If Steinbarr Builders makes the upgrades, what will the new cost$-$plus price per home be$?$ Should the company differentiate its product in this manner?

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