Mountain Home Properties is developing a subdivision that includes 300 home lots

Question

Mountain Home Properties is developing a subdivision that includes 300 home lots. The 225 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 75 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $50,000 and for each Hilltop lot is $100,000. The developer acquired the land for $2,500,000 and spent another $2,000,000 on street and utilities improvements.

Required:
Assign the joint land and improvement costs to the lots using the value basis of allocation and determine the average cost per lot. (Omit the "$" sign in your response.)

Explanation / Answer

Amt Cost/lot Total Cost/Lot Canyon 225 50,000.00 11,250,000.00 0.75 Hilltop 75 100,000.00 7,500,000.00 0.25 A Total 300 18,750,000.00 Cost of Land (2,500,000.00) Cost of Utilities (2,000,000.00) B (4,500,000.00) A+B 14,250,000.00 Avg Cost of Canyon 47,500.00 Avg Cost of Hilltop 47,500.00

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