Morice Industries Inc

question 21

Multiple Choice

Morice Industries Inc. has developed a new injection mold, model IA-05, that is designed to offer superior performance to a comparable injection mold sold by Morice's main competitor. The competing injection mold sells for $54,000 and needs to be replaced after 1,000 hours of use. It also requires $7,000 of preventive maintenance during its useful life. Model IA-05's performance capabilities are similar to the competing product with two important exceptions-it needs to be replaced only after 2,000 hours of use and it requires $8,000 of preventive maintenance during its useful life.
-From a value-based pricing standpoint what is model IA-05's economic value to the customer over its 2,000 hour life?

• A) $114,000
• B) $68,000
• C) $108,000
• D) $60,000

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Definitions:

Variable Costs

Expenditures that are directly linked to the production or sales volume, including direct labor and raw materials.

Refurbishing Materials

Materials used in the process of cleaning, repairing, and updating an item to bring it back to a like-new condition, often in electronics and furniture.

Containers Refurbished

Involves repairing, cleaning, and updating used containers to extend their useful life or repurpose them for other uses.

Spending Variance

The difference between the actual cost incurred for an item and its planned or budgeted cost, indicating how well a company manages its expenses.