New York Real Estate Salesperson ExaminationReal Estate CalculationsHard
A developer purchased a 10-acre parcel of land for $250,000. They plan to subdivide it into 25 equal lots. Road and utility installation costs are estimated at $75,000. If the developer wants to make a 25% profit on the total project cost, what is the minimum selling price per lot?
- A$15,000
- B$18,750
- C$13,000
- D$16,250
Show answer & explanationAnswer & explanation
Correct answer: D. $16,250
First, calculate the total project cost: $250,000 (land) + $75,000 (improvements) = $325,000. Next, calculate the desired profit: $325,000 * 0.25 = $81,250. Then, calculate the total sales needed: $325,000 + $81,250 = $406,250. Finally, divide the total sales needed by the number of lots: $406,250 / 25 lots = $16,250 per lot. The land acreage is irrelevant.
Why the other options are wrong
- A. This is a common miscalculation of profit or total sales needed.
- B. This incorrectly calculates profit on only the land cost or miscalculates the total.
- C. This calculates the project cost per lot without including profit.
Subdivision Profit Calculation
The process of determining the required selling price per lot in a subdivision to cover all costs (acquisition, development) and achieve a desired profit margin.
- Includes land acquisition cost and all development expenses.
- Profit is typically calculated on the total project cost.
- The selling price per unit must cover a pro-rata share of total costs plus profit.
Memory trick: Total costs first, then add profit's thirst, divide by lots, best price burst.