Question

Morr Logistic Solutions Corporation has developed a new forklift-model QY-49-that has been designed to out perform a competitor's best-selling forklift. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $3.70 per hour, and sells for $109,000. In contrast, model QY-49 has a useful life of 40,000 hours of service and its operating cost is $2.10 per hour. Morr has not yet established a selling price for model QY49 From a value-based pricing standpoint what is QY-49's economic value to the customer over its 40,000 hour useful life? Multiple Choice $500,000 $193.000 $146,000 $391.000

Answer 1

Computation of economic value to customer over the 40000 hours useful life of Model QY-49 :

Economic value to the customer = Reference cost value + Differential cost value

Given that , cost of the alternative = $109000 and it's useful life is 10000 hrs.

For 40000 hrs. , we need four models of such type

Therefore, Reference cost value = cost of alternative × 4 =$109000×4 = $436000.

And also given that,

operating cost per hour for alternative model = $3.70 p. hr

operating cost per hour for QY-49 model = $2.10 p. hr

Differential cost per hour = $3.70 - $2.10 = $1.6 p. hr

Therefore , Differential cost for 40000 hrs = 40000hrs × $1.6 = $64000.

Hence,

ECONOMIC VALUE TO THE CUSTOMER

= $436000 + $64000

= $500000

_____×_____

ALL THE BEST

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