Bellini Robotics Corporation Has Developed a New Robot-Model EM-28-That Has

question 305

Essay

Bellini Robotics Corporation has developed a new robot-model EM-28-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $1.40 per hour, and sells for $129,000. In contrast, model EM-28 has a useful life of 90,000 hours of service and its operating cost is $0.80 per hour. Bellini has not yet established a selling price for model EM-28.
Required:
From a value-based pricing standpoint:
a. What is the reference value that Bellini should consider when pricing model EM-28?
b. What is the differentiation value offered by model EM-28 relative to the competitor's offering for each 90,000 hours of service?
c. What is model EM-28's economic value to the customer over its 90,000 hour useful life?
d. What range of possible prices should Bellini consider when setting a price for model EM-28?

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Definitions:

Residual Term

The difference between observed values and the estimated values in a regression model.

Random Error

An error in measurement caused by unpredictable fluctuations in the variables being measured.

Least Squares Regression Line

A straight line that best fits the data points in a scatter plot by minimizing the sum of the squares of the vertical distances (residues) of the points from the line.

Relationship Between X And Y

A term often used in statistics and research to describe how two variables change relative to each other.