Rapson Pure Water Solutions Corporation has developed a new water purification system-model EN-78-that has been designed to outperform a competitor's best-selling water purification system. Model EN-78 has a useful life of 120,000 hours of service and its operating cost is $0.70 per hour. In contrast, the competitor's product has a useful life of 40,000 hours of service and has operating costs that average $1.20 per hour. The competitor's water purification system sells for $149,000. Rapson has not yet established a selling price for model EN-78.From a value-based pricing standpoint what range of possible prices should Rapson consider when setting a price for EN-78?
A) $233,000 ≤ Value-based price ≤ $358,000
B) $358,000 ≤ Value-based price ≤ $507,000
C) $149,000 ≤ Value-based price ≤ $507,000
D) $149,000 ≤ Value-based price ≤ $233,000

Question

Quizplus · Accepted Answer

The value-based price should consider the cost savings and extended useful life of EN-78 compared to the competitor's product. EN-78 offers 3 times the useful life and lower operating costs, which justifies a higher price up to $507,000, calculated by comparing total costs over the lifespan of both products.

Rapson Pure Water Solutions Corporation Has Developed a New Water