Eytchison Industrial Products Inc.has developed a new industrial grinder,model OK-23,that is designed to offer superior performance to a comparable grinder sold by Eytchison's main competitor.The competing grinder sells for $33,000 and needs to be replaced after 1,000 hours of use.It also requires $6,000 of preventive maintenance during its useful life.Model OK-23's performance capabilities are similar to the competing grinder with two important exceptions-it needs to be replaced only after 3,000 hours of use and it requires $12,000 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint what is model OK-23's economic value to the customer over its 3,000 hour life?

Question

Quizplus · Accepted Answer

The Answer of Eytchison Industrial Products Inc.has developed a new industrial grinder,model OK-23,that is designed to offer superior performance to a comparable grinder sold by Eytchison's main competitor.The competing grinder sells for $33,000 and needs to be replaced after 1,000 hours of use.It also requires $6,000 of preventive maintenance during its useful life.Model OK-23's performance capabilities are similar to the competing grinder with two important exceptions-it needs to be replaced only after 3,000 hours of use and it requires $12,000 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint what is model OK-23's economic value to the customer over its 3,000 hour life?