Eytchison Industrial Products Incorporated Has Developed a New Industrial Grinder

question 26

Essay

Eytchison Industrial Products Incorporated has developed a new industrial grinder, model OK-23, that is designed to offer superior performance to a comparable grinder sold by Eytchison's main competitor. The competing grinder sells for $43,000 and needs to be replaced after 1,000 hours of use. It also requires $8,000 of preventive maintenance during its useful life. Model OK-23's performance capabilities are similar to the competing grinder with two important exceptions-it needs to be replaced only after 3,000 hours of use and it requires $16,000 of preventive maintenance during its useful life.Required:
From a value-based pricing standpoint what is model OK-23's economic value to the customer over its 3,000 hour life?

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Definitions:

General Systems Theory

An interdisciplinary theory about the nature of complex systems in nature, society, and science, emphasizing that systems can have commonalities.

Solar System

The collection of celestial bodies, including the sun, planets, moons, asteroids, comets, and meteoroids, that orbit around the sun due to its gravitational pull.

Chester Barnard

An American business executive and scholar, known for his contributions to management theory, particularly the concept of the informal organization.

Systems Model

is a representation of a complex system or process, outlining its components, relationships, and dynamics.