Valmont Company developed a new industrial piece of equipment called the XP The company is considering two methods of establishing a selling price for the XPabsorption costplus pricing and valuebased pricing.

Valmonts cost accounting system reports an absorption unit product cost for XP of $ Its markup percentage on absorption cost is The companys marketing managers have expressed concerns about the use of absorption costplus pricing because it seems to overlook the fact that the XP offers superior performance relative to the comparable piece of equipment sold by Valmonts primary competitor. More specifically, the XP can be used for hours before replacement. It only requires $ of preventive maintenance during its useful life and it consumes $ of electricity per hours used.

These figures compare favorably to the competing piece of equipment that sells for $ needs to be replaced after hours of use, requires $ of preventive maintenance during its useful life, and consumes $ of electricity per hours used.

Required:

If Valmont uses absorption costplus pricing, what price will it establish for the XP

What is XPs economic value to the customer EVC over its hour life?

If Valmont uses valuebased pricing, what range of possible prices should it consider when setting a price for the XP