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 $60,000 and needs to be replaced after 2,500 hours of use. It also requires $5,000 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 10,000 hours of use and it requires $12,500 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 $60,000 ≤ Value-based price ≤ $240,000 $187,500 ≤ Value-based price ≤ $247,500 $187,500 ≤ Value-based price ≤ $240,000 $60,000 ≤ Value-based price ≤ $247,500

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?