Exercise 13A-6 (Static) Value-Based Pricing; Absorption Costing Approach to Cost-Plus Pricing [LO 13-8], [LO 13-10] Valmont...

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Exercise 13A-6 (Static) Value-Based Pricing; Absorption Costing Approach to Cost-Plus Pricing [LO 13-8], [LO 13-10] Valmont Company has developed a new Industrial piece of equipment called the XP-200. The company is considering two methods of establishing a selling price for the XP-200-absorption cost-plus pricing and value- based pricing Valmont's cost accounting system reports an absorption unit product cost for XP-200 of $8,400. Its markup percentage on absorption cost is 85%. The company's marketing managers have expressed concerns about the use of absorption cost-plus pricing because it seems to overlook the fact that the XP-200 offers superior performance relative to the comparable piece of equipment sold by Valmont's primary competitor. More specifically, the XP-200 can be used for 20,000 hours before replacement. It only requires $1,000 of preventive maintenance during its useful life and it consumes $120 of electricity per 1,000 hours used. These figures compare favorably to the competing piece of equipment that sells for $15,000, needs to be replaced after 10,000 hours of use, requires $2,000 of preventive maintenance during its useful life, and consumes $140 of electricity per 1,000 hours used. Required: 1. If Valmont uses absorption cost-plus pricing, what price will it establish for the XP-200? 2. What Is XP-200's economic value to the customer (EVC) over its 20,000-hour life? 3. If Valmont uses value-based pricing, what range of possible prices should it consider when setting a price for the XP-200? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 1. If Valmont uses absorption cost-plus pricing, what price will it establish for the XP-2007 2. What is XP-200's economic value to the customer (EVC) over its 20,000-hour life? 1. Selling price per unit 2 EVC $ 15,540 ( $ 6,800 Reg 12 Req 3 > Exercise 13A-6 (Static) Value-Based Pricing; Absorption Costing Approach to Cost-Plus Pricing [LO 13-8], [LO 13-10] Valmont Company has developed a new Industrial piece of equipment called the XP-200. The company is considering two methods of establishing a selling price for the XP-200-absorption cost-plus pricing and value- based pricing Valmont's cost accounting system reports an absorption unit product cost for XP-200 of $8,400. Its markup percentage on absorption cost is 85%. The company's marketing managers have expressed concerns about the use of absorption cost-plus pricing because it seems to overlook the fact that the XP-200 offers superior performance relative to the comparable piece of equipment sold by Valmont's primary competitor. More specifically, the XP-200 can be used for 20,000 hours before replacement. It only requires $1,000 of preventive maintenance during its useful life and it consumes $120 of electricity per 1,000 hours used. These figures compare favorably to the competing piece of equipment that sells for $15,000, needs to be replaced after 10,000 hours of use, requires $2,000 of preventive maintenance during its useful life, and consumes $140 of electricity per 1,000 hours used. Required: 1. If Valmont uses absorption cost-plus pricing, what price will it establish for the XP-200? 2. What Is XP-200's economic value to the customer (EVC) over its 20,000-hour life? 3. If Valmont uses value-based pricing, what range of possible prices should it consider when setting a price for the XP-200? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 1. If Valmont uses absorption cost-plus pricing, what price will it establish for the XP-2007 2. What is XP-200's economic value to the customer (EVC) over its 20,000-hour life? 1. Selling price per unit 2 EVC $ 15,540 ( $ 6,800 Reg 12 Req 3 >