Tavis Robotics Corporation Has Developed a New Robot-Model FI-73-That Has

question 232

Multiple Choice

Tavis Robotics Corporation has developed a new robot-model FI-73-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for $109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73.From a value-based pricing standpoint what range of possible prices should Tavis consider when setting a price for FI-73?

• A) $187,000 ≤ Value-based price ≤ $278,000
• B) $109,000 ≤ Value-based price ≤ $187,000
• C) $109,000 ≤ Value-based price ≤ $387,000
• D) $278,000 ≤ Value-based price ≤ $387,000

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Definitions:

Sales

The revenue earned from selling goods or services to customers.

Selling and Administrative Expense Budget

An estimation of the costs related to sales and administrative activities for a specific period, used for planning and control.

Direct Materials

Raw materials that can be directly associated with the production of specific goods or services.

Direct Labor

The wages and benefits paid for labor that is directly involved in the production of goods or the provision of services.