Montecalvo Logistic Solutions Corporation Has Developed a New Forklift-Model PI-28-That

question 69

Multiple Choice

Montecalvo Logistic Solutions Corporation has developed a new forklift-model PI-28-that has been designed to outperform 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 $9.70 per hour, and sells for $139,000. In contrast, model PI-28 has a useful life of 20,000 hours of service and its operating cost is $5.50 per hour. Montecalvo has not yet established a selling price for model PI-28.From a value-based pricing standpoint what is the differentiation value offered by PI-28 relative to the competitor's offering for each 20,000 hours of service?

• A) $223,000
• B) $236,000
• C) $84,000
• D) $249,000

---

Definitions:

Minimum

The lowest allowable or possible amount, level, or point.

Marginal Cost

The amount needed to generate one more unit of a good or service.

Average Total Cost

The overall expense of manufacturing, when dispersed across the number of products made, encompassing both constant and fluctuating expenses.

Average Variable Cost

The sum of all costs that fluctuate with production volume, divided by the total amount of goods produced.