Question 1

Kingsford Pure Water Solutions Corporation has developed a new water purification system-model PC-97-that has been designed to outperform a competitor's best-selling water purification system. Model PC-97 has a useful life of 100,000 hours of service and its operating cost is $0.70 per hour. In contrast, the competitor's product has a useful life of 20,000 hours of service and operating costs that average $1.00 per hour. The competitor's water purification system sells for $149,000. Kingsford has not yet established a selling price for model PC-97.
Required:
From a value-based pricing standpoint what range of possible prices should Kingsford consider when setting a price for model PC-97?

Accepted Answer

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Question 2

"Trueba Electronics Corporation" has developed a new testing instrument-model JJ-92-that has been designed to outperform a competitor's best-selling instrument. Model JJ-92 has a useful life of 100,000 hours of service and its operating cost is $0.50 per hour. In contrast, the competitor's product has a useful life of 20,000 hours of service and has operating costs that average $0.80 per hour. The competitor's instrument sells for $109,000. "Trueba" has not yet established a selling price for model JJ-92.
Required:
From a value-based pricing standpoint:
a. What is the reference value that "Trueba" should consider when pricing model JJ-92?
b. What is the differentiation value offered by model JJ-92 relative to the competitor's offering for each 100,000 hours of service?
c. What is model JJ-92's economic value to the customer over its 100,000 hour useful life?
d. What range of possible prices should "Trueba "consider when setting a price for model JJ-92?

Accepted Answer

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Question 3

Thoen Heavy Machinery Corporation has developed a new drill press-model OU-84-that has been designed to outperform a competitor's best-selling drill press. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $1.60 per hour, and sells for $189,000. In contrast, model OU-84 has a useful life of 120,000 hours of service and its operating cost is $1.00 per hour. Thoen has not yet established a selling price for model OU-84.
Required:
From a value-based pricing standpoint what range of possible prices should Thoen consider when setting a price for model OU-84?

Accepted Answer

The answer of Thoen Heavy Machinery Corporation has developed a...

Question 4

Wyler Logistic Solutions Corporation has developed a new forklift-model IM-40-that has been designed to outperform a competitor's best-selling forklift. The competitor's product has a useful life of 40,000 hours of service, has operating costs that average $1.30 per hour, and sells for $139,000. In contrast, model IM-40 has a useful life of 120,000 hours of service and its operating cost is $0.80 per hour. Wyler has not yet established a selling price for model IM-40.
Required:
From a value-based pricing standpoint what is the differentiation value offered by model IM-40 relative to the competitor's offering for each 120,000 hours of service?

Accepted Answer

The answer of Wyler Logistic Solutions Corporation has developed a...

Question 5

Ralph Plastics Equipment Corporation has developed a new injection mold-model IX-94-that has been designed to outperform a competitor's best-selling injection mold. Model IX-94 has a useful life of 50,000 hours of service and its operating cost is $2.00 per hour. In contrast, the competitor's product has a useful life of 10,000 hours of service and has operating costs that average $3.50 per hour. The competitor's injection mold sells for $129,000. Ralph has not yet established a selling price for model IX-94.
Required:
From a value-based pricing standpoint what is model IX-94's economic value to the customer over its 50,000 hour useful life?

Accepted Answer

The answer of Ralph Plastics Equipment Corporation has developed a...

Question 6

Aboud Industrial Products Incorporated has developed a new industrial high pressure pump, model ON-28, that is designed to offer superior performance to a comparable high pressure pump sold by Aboud's main competitor. The competing high pressure pump sells for $87,000 and needs to be replaced after 1,000 hours of use. It also requires $15,000 of preventive maintenance during its useful life. Model ON-28's performance capabilities are similar to the competing high pressure pump with two important exceptions-it needs to be replaced only after 3,000 hours of use and it requires $31,000 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint what range of possible prices should Aboud consider when setting a price for model ON-28?

Accepted Answer

The answer of Aboud Industrial Products Incorporated has developed a...

Question 7

Eytchison Industrial Products Incorporated 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 $43,000 and needs to be replaced after 1,000 hours of use. It also requires $8,000 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 $16,000 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?

Accepted Answer

The answer of Eytchison Industrial Products Incorporated has developed a...

Question 8

Bellini Robotics Corporation has developed a new robot-model EM-28-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $1.40 per hour, and sells for $129,000. In contrast, model EM-28 has a useful life of 90,000 hours of service and its operating cost is $0.80 per hour. Bellini has not yet established a selling price for model EM-28.
Required:
From a value-based pricing standpoint:
a. What is the reference value that Bellini should consider when pricing model EM-28?
b. What is the differentiation value offered by model EM-28 relative to the competitor's offering for each 90,000 hours of service?
c. What is model EM-28's economic value to the customer over its 90,000 hour useful life?
d. What range of possible prices should Bellini consider when setting a price for model EM-28?

Accepted Answer

The answer of Bellini Robotics Corporation has developed a new...

Question 9

Bochenski Mechanical Corporation has developed a new industrial grinder-model UF-48-that has been designed to outperform a competitor's best-selling industrial grinder. Model UF-48 has a useful life of 80,000 hours of service and its operating cost is $1.95 per hour. In contrast, the competitor's product has a useful life of 20,000 hours of service and has operating costs that average $2.75 per hour. The competitor's industrial grinder sells for $148,000. Bochenski has not yet established a selling price for model UF-48.
Required:
From a value-based pricing standpoint what is the differentiation value offered by model UF-48 relative to the competitor's offering for each 80,000 hours of service?

Accepted Answer

The answer of Bochenski Mechanical Corporation has developed a new...

Question 10

Mounger Industrial Products Incorporated has developed a new industrial forklift, model CZ-03, that is designed to offer superior performance to a comparable forklift sold by Mounger's main competitor. The competing forklift sells for $27,000 and needs to be replaced after 1,000 hours of use. It also requires $3,000 of preventive maintenance during its useful life. Model CZ-03's performance capabilities are similar to the competing forklift with two important exceptions-it needs to be replaced only after 4,000 hours of use and it requires $6,000 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint what is the differentiation value offered by model CZ-03 relative to the competitor's forklift for each 4,000 hours of usage?

Accepted Answer

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Question 11

Management of Thebeau, Incorporated, is considering a new product that would have a selling price of $49 per unit and projected sales of 35,000 units. The new product would require an investment of $570,000. The desired return on investment is 14%.Required:
Determine the target cost per unit for the new product.

Accepted Answer

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Question 12

Weakly Industrial Products Incorporated has developed a new industrial instrument, model CT-60, that is designed to offer superior performance to a comparable instrument sold by Weakly's main competitor. The competing instrument sells for $22,000 and needs to be replaced after 1,000 hours of use. It also requires $4,000 of preventive maintenance during its useful life. Model CT-60's performance capabilities are similar to the competing instrument with two important exceptions-it needs to be replaced only after 2,000 hours of use and it requires $6,000 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint:
a. What is the reference value that Weakly should consider when pricing model CT-60?
b. What is the differentiation value offered by model CT-60 relative to the competitor's instrument for each 2,000 hours of usage?
c. What is model CT-60's economic value to the customer over its 2,000 hour life?
d. What range of possible prices should Weakly consider when setting a price for model CT-60?

Accepted Answer

The answer of Weakly Industrial Products Incorporated has developed a...

Quiz 13: Differential Analysis: the Key to Decision Making