Conaghan Avionics Corporation Has Developed a New High Pressure Pump-Model

question 244

Multiple Choice

Conaghan Avionics Corporation has developed a new high pressure pump-model RA-79-that has been designed to outperform a competitor's best-selling high pressure pump. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $3.60 per hour, and sells for $159,000. In contrast, model RA-79 has a useful life of 60,000 hours of service and its operating cost is $2.00 per hour. Conaghan has not yet established a selling price for model RA-79. From a value-based pricing standpoint what is RA-79's economic value to the customer over its 60,000 hour useful life?

• A) $414,000
• B) $267,000
• C) $255,000
• D) $279,000

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