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Page 1 of 4 Research & Development
Reliability (MTBF)
Each thousand hours of reliability (MTBF) adds $0.30 to the material cost. A product with 20,000 hours reliability includes $0.30 X 20,000/1000 = $6.00 in reliability costs.
Positioning
Material costs are also driven by positioning. The higher the technology, the higher the cost. At the beginning of the simulation, the trailing edge of the Low Tech segment has the lowest cost, at $1.50; the leading edge of the High Tech segment has a cost of $11.00. Positioning material costs decrease 3% to 4% per year.
Material Positioning Costs: These costs vary depending on the product’s location on the perceptual map. For example, at the start of Round 1, products placed at the trailing of edge of the Low Tech segment would have a positioning component cost of $1.50; products placed at the leading edge of the High Tech segment would have a positioning component cost of $11.00.
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