Schimpf Industries Incorporated Has Developed a New Grinder, Model WC-13

question 139

Multiple Choice

Schimpf Industries Incorporated has developed a new grinder, model WC-13, that is designed to offer superior performance to a comparable grinder sold by Schimpf's main competitor. The competing grinder sells for $24,000 and needs to be replaced after 1,000 hours of use. It also requires $2,000 of preventive maintenance during its useful life. Model WC-13's performance capabilities are similar to the competing product with two important exceptions-it needs to be replaced only after 4,000 hours of use and it requires $5,000 of preventive maintenance during its useful life.From a value-based pricing standpoint what range of possible prices should Schimpf consider when setting a price for model WC-13?

• A) $24,000 ≤ Value-based price ≤ $99,000
• B) $75,000 ≤ Value-based price ≤ $96,000
• C) $24,000 ≤ Value-based price ≤ $96,000
• D) $75,000 ≤ Value-based price ≤ $99,000

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Definitions:

Prepaid Insurance

An asset account that represents insurance payments made in advance for coverage that extends over a future period.

Depreciation Expense

The orderly apportioning of the expense of a concrete asset over its expected lifetime, illustrating its decline in value as time progresses.

Factual Measurement

A term referring to the quantification of data that is based on facts and objectivity, often used in the context of scientific or financial analysis.

Accrued Salaries

Salaries that have been earned by employees but have not yet been paid by the company.