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- McDermott Company has developed a new industrial component called IC-75. The company is excited about IC-75 because it offers superior performance relative to the comparable component soid by McDermott's primary competitor. The competing part sells for $1,200 and needs to be replaced after 2,000 hours of use. It also requires $200 of preventive maintenance during its useful life. The IC-75's performance capabilities are similar to its competing product with two important exceptions-it needs to be replaced after 4,000 hours of use and it requires $300 of preventive maintenance during its useful ife. Required: From a value-based pricing standpoint: 1. What is the reference value that McDermott should consider when pricing IC-75? 2. What is the differentiation value offered by IC-75 relative the competitor's offering for each 4,000 hours of usage? 3. What is IC-75's economic value to the customer over its 4,000-hour life? 4. What range of possible prices should McDermott consider when…McDermott Company has developed a new industrial component called IC-75. The company is excited about IC-75 because it offers superior performance relative to the comparable component sold by McDermott's primary competitor. The competing part sells for $1,300 and needs to be replaced after 2,100 hours of use. It also requires $250 of preventive maintenance during its useful life. The IC-75's performance capabilities are similar to its competing product with two important exceptions-it needs to be replaced after 4,200 hours of use and it requires $350 of preventive maintenance during its useful life. Required: From a value-based pricing standpoint: 1. What is the reference value that McDermott should consider when pricing IC-75? 2. What is the differentiation value offered by IC-75 relative the competitor's offering for each 4,200 hours of usage? 3. What is IC-75's economic value to the customer over its 4,200-hour life? 4. What range of possible prices should McDermott consider when…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? Multiple Choice $24,000 s Value-based prices $99,000 $75,000 s Value-based prices $96.000 $24,000 s Value-based prices $96,000 $75,000s Value-based prices $99,000
- Schimpf Industries Inc. 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 $70,000 and needs to be replaced after 4,100 hours of use. It also requires $8,200 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 16,400 hours of use and it requires $20,500 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? Multiple Choice $70,000 ≤ Value-based price ≤ $292,300 $222,300 ≤ Value-based price ≤ $280,000 $70,000 Value-based price ≤ $280,000 $222,300 ≤ Value-based price ≤ $292,300Algonac Moldings produces a product made from a metal alloy. Two suppliers, Liebold Metal and Cecil Distributors, supply the alloy. Neither supplier can meet Algonac's typical demand, because of capacity constraints. The material from Liebold is less expensive to buy but more difficult to use, resulting in greater waste. The metal alloy is highly toxic and any waste requires costly handling to avoid environmental accidents. Last year the cost of handling the waste totaled $1,200,000. Additional data from last year’s operations are shown as follows: Liebold Metals Cecil Distributors Amount of material purchased (tons) 64.8 115.2 Amount of waste (tons) 9.0 11.0 Cost of purchases $ 1,488,000 $ 3,312,000 Required: Allocate the cost of the waste handling to the two suppliers based on: Amount of material purchased. Amount of waste. Cost of material purchased. Amount of material purchased. Note: Do not round intermediate calculations. A.)…Cables Electronics Corporation has developed a new instrument-model XG-75-that has been designed to outperform a competitor's best-selling instrument. Model XG-75 has a useful life of 76,000 hours of service and its operating cost is $3.80 per hour. In contrast, the competitor's product has a useful life of 38,000 hours of service and has operating costs that average $7.40 per hour. The competitor's instrument sells for $148,000. Cables has not yet established a selling price for model XG-75. From a value-based pricing standpoint what is the reference value that Cables should consider when pricing model XG-75? Multiple Choice $421,600 $429,200 $566,000 $148,000
- Assume that a company has developed a new industrial component called Part A that offers superior performance relative to its competitors. The competing part sells for $1,500 and needs to be replaced after 1,500 hours of use. It also requires $400 of preventive maintenance during its useful life. Part A is similar to its competing product with two important exceptions-it needs to be replaced after 3,000 hours of use and it requires only $200 of preventive maintenance during its useful life. From a value-based pricing standpoint, what is the differentiation value offered by Part A relative to the competitor's offering for each 3,000 hours of usage? Multiple Choice $3.200 $3,600 $2,100 $1,700WorldSystems manufactures an optical switch that it uses in its final product. WorldSystems incurred the following manufacturing costs when it produced 72,000 units last year: WorldSystems does not yet know how many switches it will need this year; however, another company has offered to sell WorldSystems $11.50 per unit. If WorldSystems buys the switch from the outside supplier, the manufacturing facilities that will be idle cannot be used fe purpose, yet none of the fixed costs are avoidable. E (Click the icon to view the manufacturing costs.) Read the reguirements. Requirement 1. Given the same cost structure, should WorldSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether WorldSystems should make or buy the switch. (Enter a "0" for any zero amounts. Round amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make.) World Systems Incremental Analysis for Outsourcing Decision - X Make Buy…Algonac Moldings produces a product made from a metal alloy. Two suppliers, Liebold Metal and Cecil Distributors, supply the alloy. Neither supplier can meet Algonac's typical demand, because of capacity constraints. The material from Liebold is less expensive to buy but more difficult to use, resulting in greater waste. The metal alloy is highly toxic and any waste requires costly handling to avoid environmental accidents. Last year the cost of handling the waste totaled $1,756,920. Additional data from last year's operations are shown as follows: Amount of material purchased (tons) Amount of waste (tons) Cost of purchases Req A1 Req A2 Liebold Metals Required: a. Allocate the cost of the waste-handling to the two suppliers based on: 1. Amount of material purchased. 2. Amount of waste. 3. Cost of material purchased. Req A3 Allocated waste handling cost 68.8 11.0 $ Complete this question by entering your answers in the tabs below. 2,178,581 Liebold Metals Cecil Distributors Amount of…
- MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 10,000 units of the module per year for $16 each. The following information pertains to MSI’s production of the control modules: Direct materials $ 9 Direct labor 4 Variable manufacturing overhead 2 Fixed manufacturing overhead 3 Total cost per unit $ 18 MSI has determined that it could eliminate all variable costs if the control modules were produced externally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production. Suppose that the MSI space currently used for the modules could be utilized by a new product line that would generate $35,000 in annual profit. Recompute the difference in cost between making and buying under this scenario.Toledo Tool Company plans to introduce a new product. The company also considers adopting a new computer-assisted manufacturing system. The new product can be manufactured by either the new computer assisted system or its traditional labor-intensive production system. The company can achieve the same quality of the product regardless of which the production system employed. The estimated product costs by the two production systems are as follows: Traditional Labor-Intensive Production Systems New Computer-Assisted Manufacturing Systems Direct Material (per unit) $10.5 $8.4 Direct Labor (per unit) $14.0 $9.0 Variable overhead (per unit) $5.5 $3.4 Fixed overhead $2M $3.5M The marketing department recommends that the unit selling price of the new product be at $65, and the company expects the selling expenses for the new product to be $830,000 annually plus $4 for each unit sold. The company is currently subject to a 40% income tax rate.…For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output, the company has idle capacity that could be used to produce the starters.The chief engineer has recommended against this move, however, pointing out that the cost to produce thestarters would be greater than the current $8.40 per unit purchase price:Per Unit TotalDirect materials ............................... $3.10Direct labor ...................................... 2.70Supervision ..................................... 1.50 $60,000Depreciation .................................... 1.00 $40,000Variable manufacturing overhead ... 0.60Rent ................................................ 0.30 $12,000Total production cost ....................... $9.20A supervisor would have to be hired to oversee production of the starters. However, the company hassufficient idle tools and machinery that no new equipment would have to be purchased. The rent…