Heart & Home Properties is developing a subdivision that
includes 500 home lots. The 170 lots in the Canyon section are
below a ridge and do not have views of the neighboring canyons and
hills; the 330 lots in the Hilltop section offer unobstructed
views. The expected selling price for each Canyon lot is $47,000
and for each Hilltop lot is $108,000. The developer acquired the
land for $2,300,000 and spent another $1,300,000 on street and
utilities improvements.
Assign the joint land and improvement costs to the lots using the
value basis of allocation and determine the average cost per lot.
(Do not round your intermediate calculations.)
Sale value is calculated as follows:
Canyon Lots = Number of Plots * Sale price per plot
= 170 lots * $47,000
= $7,990,000
Hilltop Lots = Number of Plots * Sale Price per unit
= 330 lots * $108,000
=$35,640,000
Percentage allocation for total sale value:
Total sale value = Canyon Lots sale value + Hilltop Lots Sale Value
= $7,990,000 + $35,640,000
= $43,630,000
Canyon Lots percentage of total sale value = $7,990,000/$43,630,000*100
= 18%
Hilltop Lot percentage of total sale value = $35,640,000/$43,630,000*100
= 82%
Cost value is calculated below:
Total cost value = Cost of Land + Street and Utilities Improvement
= $2,300,000 + $1,300,000
= $3,600,000
Canyon Lots Cost value = $3,600,000*18%
= $648,000
Hilltop Lots Cost value = $3,600,000*82%
= $2,952,000
| Lots | Total Sale Value(A) | Total Cost Value(B) | Profit(A - B) |
|---|---|---|---|
| Canyon Lots | $7,990,000 | $648,000 | $7,342,000 |
| Hilltop Lots | $35,640,000 | $2,952,000 |
$32,688,000 |
| Total | $43,630,000 | $3600,000 | $40,030,000 |
Average Cost Per lot is calculated below:
Total Lots = Canyon Lots + Hilltop Lots
= 170 lots + 330 lots
= 500 lots
Total Cost = $3600,000 (Already calculated above)
Average Cost Per lot = Total Cost/Total Lots
= $3600,000 /500 lots
= $7,200 Per lot
Average Cost Per lot is $7,200
Heart & Home Properties is developing a subdivision that includes 500 home lots. The 170 lots...