Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. valmont's cost accounting system reports an absorp

Valmont's cost accounting system reports an absorption unit product cost for XP-200 of $9,500. Its...

80.2K

Verified Solution

Question

Accounting

Valmont's cost accounting system reports an absorption unit product cost for XP-200 of $9,500. 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 20,000 hours before replacement. It only requires $2,100 of preventive maintenance during its useful life and it consumes $175 of electricity per 1,000 hours used.
These figures compare favorably to the competing piece of equipment that sells for $20,000, needs to be replaced after 10,000 hours of use, requires $4,200 of preventive maintenance during its useful life, and consumes $206 of electricity per 1,000 hours used.
Required:
If Valmont uses absorption cost-plus pricing, what price will it establish for the XP-200?
What is XP-200's economic value to the customer (EVC) over its 20,000-hour life?
If Valmont uses value-based pricing, what range of possible prices should it consider when setting a price for the XP-200?
image

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

Problem 11-14 Replacement Analysis DeYoung Entertainment Enterprises is considering replacing the latex molding machine it uses to fabricate...

Medical Sciences
1.2K views

Demonstrating Referred Pain You’ll need a small plastic bin (approximately 1 quart volume or large enough to place...

Biology
1.2K views

You are studying a group of Oregonian beavers, and you are interested in the population genetics...

Psychology
1.2K views

READING TEXT: Fleeing Facebook Carmen Joy King 1 In March, at the peak of Facebook popularity,...

Mechanical Engineering
1.2K views

1.Why is the hole missing ? •Operator error. 2.Why did the operator make the error ? •He wasn’t...

General Management
1.2K views

Q2: Discuss the four types of Cloud Computing and five benefits of Cloud Computing. Discuss with examples. Thanks...

Accounting
1.2K views

Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed...

Basic Math
1.2K views

The area of a triangle, a, varies jointly with the length of the base, b,...

Calculus
1.2K views

E GENERAL PERMANENT ENDOWMENTS Find the size of the permanent endowment needed to generate an...

Algebra
1.2K views

iable compound inequality 2x562 or X 34 10

Accounting
1.2K views

Using Excel, redesign the flowchart for Richards Flowchart so that the errors are removed. The...

Accounting
1.2K views

Steve and Roger allocate 2/3 of their partnership's profits and losses to Steve and 1/3...