Valmont Company has developed a new industrial piece of equipment called the XP$-200.$ The company is considering two methods of establishing a selling price for the XP$-200-$absorption cost$-$plus pricing and value$-$based pricing.

Valmont's cost accounting system reports an absorption unit product cost for XP$-200$ of $$8,500.$ Its markup percentage on absorption cost is $85\%.$ The company's marketing managers have expressed concerns about the use of absorption cost$-$plus pricing because it seems to overlook the fact that the XP$-200$ offers superior performance relative to the comparable piece of equipment sold by Valmont's primary competitor. More specifically, the XP$-200$ can be used for $10,000$ hours before replacement. It only requires $$1,100$ of preventive maintenance during its useful life and it consumes $$125$ of electricity per $500$ hours used.

These figures compare favorably to the competing piece of equipment that sells for $$10,000,$ needs to be replaced after $5,000$ hours of use, requires $$2,200$ of preventive maintenance during its useful life, and consumes $$146$ of electricity per $500$ hours used.

Required:

If Valmont uses absorption cost$-$plus pricing, what price will it establish for the XP$-200?$

What is XP$-200\text{'}$s economic value to the customer $($EVC$)$ over its $10,000-$hour life?

If Valmont uses value$-$based pricing, what range of possible prices should it consider when setting a price for the XP$-200?$

Complete this question by entering your answers in the tabs below.

Req $1$ and $2$

If Valmont uses absorption cost$-$plus pricing, what price will it establish for the XP$-200?$

What is XP$-200\text{'}$s economic value to the customer $($EVC$)$ over its $10,000-$hour life?

Selling price per unit

EVC

Thanks!