a manufacturer A of very specialized 3D printers is trying to determine an appropriate price for their new printer machine to be sold to various kinds of organizations Their closest competitor is 3D inc Copier customers make decisions based on three criteria 1) probability that the machine breaks down 2) the cost of the repairs if it breaks down, and 2) operating cost. You are given the following pieces of data.

Cost of Goods sold = $75,000

	A	3Dinc
Probability of breakdown	1% over a year	18% over a year
Cost of repairs	S140,000	$140.000
Hours of operation	800	800
Hourly operating costs	$35	$25
Price		$90.000

Determine the prices if you were using a

Cost-plus approach where the desired markup is 40%

b.

Value-based pricing keeping in mind that the customer is price sensitive, and that the customer assumes a probability of breakdown of 3% over the period of a year.

C.

Why do firms use this method of pricing?