Question 1

Benefits of credit to sellers include all of the following except

Accepted Answer

A)  creating a closer association with the customers. 
B)  smoothing out sales peaks and valleys. 
C)  providing a tool for competitive advantage. 
D)  sustaining long-term sales, even if these exceed the buying power of the customer. 
A)  creating a closer association with the customers. 
B)  smoothing out sales peaks and valleys. 
C)  providing a tool for competitive advantage. 
D)  sustaining long-term sales, even if these exceed the buying power of the customer.

Question 2

The objective of the first phase of a break-even analysis is to determine the sales volume level at which the product, with an assumed price, will generate enough revenue to start earning a profit.

Accepted Answer

A) True 
 B)False

Question 3

Within the framework of a break-even analysis, an examination of ____ is conducted to determine the quantity at which the product, with an assumed price, will generate enough revenue to start earning a profit.

Accepted Answer

A)  costs 
B)  revenues 
C)  sales forecasts 
D)  costs and revenue 
A)  costs 
B)  revenues 
C)  sales forecasts 
D)  costs and revenue

Question 4

The major objective of a firm in granting credit is

Accepted Answer

A)  generating consumer goodwill. 
B)  reducing bad debt risk. 
C)  make sales. 
D)  promoting the business. 
A)  generating consumer goodwill. 
B)  reducing bad debt risk. 
C)  make sales. 
D)  promoting the business.

Question 5

Credit management should be implemented in a business when high levels of bad debt arise and should continue throughout the credit cycle until the level of bad debt is rectified.

Accepted Answer

A) True 
 B)False

Question 6

Markup pricing may be expressed in terms of a percentage of either the ____ or the cost.

Accepted Answer

A)  quantity 
B)  operating expenses 
C)  selling price 
D)  estimated expenses 
A)  quantity 
B)  operating expenses 
C)  selling price 
D)  estimated expenses

Question 7

Sound pricing practices begin with knowing product costs.

Accepted Answer

A) True 
 B)False

Question 8

Active Feet, a small manufacturer of shoes, hired an additional vice-president and purchased a barrel of synthetic rubber used to make shoe soles. These two expenses should be considered a (an) ____ and a (an) ____, respectively.

Accepted Answer

A)  selling cost/cost of goods sold 
B)  overhead cost/cost of goods sold 
C)  selling cost/overhead cost 
D)  overhead cost/selling cost 
A)  selling cost/cost of goods sold 
B)  overhead cost/cost of goods sold 
C)  selling cost/overhead cost 
D)  overhead cost/selling cost

Question 9

In conducting a comprehensive break-even analysis, a firm must examine both its revenue-cost relationships and sales forecasts.

Accepted Answer

A) True 
 B)False

Question 10

Colorful Concoctions, a maker of children's crayons, decided to price its boxes of crayons below the long-term market price. The firm agreed to reduce its profit margin from 30 percent to 5 percent in the short-term in order to increase market share and discourage other firms from entering the crayon market. Colorful Concoctions was implementing a

Accepted Answer

A)  variable pricing strategy. 
B)  skimming price strategy. 
C)  penetration pricing strategy. 
D)  price lining strategy. 
A)  variable pricing strategy. 
B)  skimming price strategy. 
C)  penetration pricing strategy. 
D)  price lining strategy.

Question 11

Credit cards are usually based on ____ account system.

Accepted Answer

A)  an open charge 
B)  an installment 
C)  a revolving 
D)  a selective 
A)  an open charge 
B)  an installment 
C)  a revolving 
D)  a selective

Question 12

Of the following four options, which one is designed as a vehicle for long-term credit?

Accepted Answer

A)  Open charge accounts 
B)  Installment accounts 
C)  Revolving charge accounts 
D)  Credit cards 
A)  Open charge accounts 
B)  Installment accounts 
C)  Revolving charge accounts 
D)  Credit cards

Question 13

In general, products that are consumed in fixed amounts have

Accepted Answer

A)  inelastic demand. 
B)  constant demand. 
C)  variable demand. 
D)  elastic demand. 
A)  inelastic demand. 
B)  constant demand. 
C)  variable demand. 
D)  elastic demand.

Question 14

In general, products that are consumed in different amounts have

Accepted Answer

A)  inelastic demand. 
B)  constant demand. 
C)  variable demand. 
D)  elastic demand. 
A)  inelastic demand. 
B)  constant demand. 
C)  variable demand. 
D)  elastic demand.

Question 15

Fine Framings, a small framing shop, uses markup pricing to arrive at a final selling price. The firm sells its frames at a price of $10, given a $6 unit cost. Fine Framings' markup on the selling price is ____, and its markup on cost is ____.

Accepted Answer

A)  66.66%, 40% 
B)  40%, 66.66% 
C)  40%, 60% 
D)  55%, 45% 
A)  66.66%, 40% 
B)  40%, 66.66% 
C)  40%, 60% 
D)  55%, 45%

Question 16

Sellers often decide to offer credit to borrowers because it helps with the exchange of purchased items.

Accepted Answer

A) True 
 B)False

Question 17

Slow-paying credit accounts

Accepted Answer

A)  almost always help to build goodwill with customers. 
B)  yield advantages from carry-over effects. 
C)  tie up the seller's working capital. 
D)  are rarely a problem for small businesses. 
A)  almost always help to build goodwill with customers. 
B)  yield advantages from carry-over effects. 
C)  tie up the seller's working capital. 
D)  are rarely a problem for small businesses.

Question 18

Hillary wants to purchase refrigerator on credit. If she uses an installment plan, which of the following is most likely to occur?

Accepted Answer

A)  She will be required to make a down payment. 
B)  She will not be charged taxes. 
C)  By law, finance charges on her account cannot exceed 20 percent of the purchase price. 
D)  She will not get a discounted price on her purchase. 
A)  She will be required to make a down payment. 
B)  She will not be charged taxes. 
C)  By law, finance charges on her account cannot exceed 20 percent of the purchase price. 
D)  She will not get a discounted price on her purchase.

Question 19

Information Express is a privately owned and operated organization that collects credit information on business firms. After the organization analyzes and evaluates the data, it makes credit ratings available to client companies for a fee. Information Express is a

Accepted Answer

A)  credit collection agency. 
B)  trade-credit agency. 
C)  financial credit agency. 
D)  credit bureau. 
A)  credit collection agency. 
B)  trade-credit agency. 
C)  financial credit agency. 
D)  credit bureau.

Question 20

All of the following are reasons for implementing a penetration pricing strategy except

Accepted Answer

A)  to gain rapid market acceptance. 
B)  to discourage new competitors' entry into the market. 
C)  to rapidly recover startup costs. 
D)  to increase existing market share. 
A)  to gain rapid market acceptance. 
B)  to discourage new competitors' entry into the market. 
C)  to rapidly recover startup costs. 
D)  to increase existing market share.

Exam 16: Pricing and Credit Decisions

Benefits of credit to sellers include all of the following except

The objective of the first phase of a break-even analysis is to determine the sales volume level at which the product, with an assumed price, will generate enough revenue to start earning a profit.

Within the framework of a break-even analysis, an examination of ____ is conducted to determine the quantity at which the product, with an assumed price, will generate enough revenue to start earning a profit.

The major objective of a firm in granting credit is

Credit management should be implemented in a business when high levels of bad debt arise and should continue throughout the credit cycle until the level of bad debt is rectified.

Markup pricing may be expressed in terms of a percentage of either the ____ or the cost.

Sound pricing practices begin with knowing product costs.

Active Feet, a small manufacturer of shoes, hired an additional vice-president and purchased a barrel of synthetic rubber used to make shoe soles. These two expenses should be considered a (an) ____ and a (an) ____, respectively.

In conducting a comprehensive break-even analysis, a firm must examine both its revenue-cost relationships and sales forecasts.

Credit cards are usually based on ____ account system.

Of the following four options, which one is designed as a vehicle for long-term credit?

In general, products that are consumed in fixed amounts have

In general, products that are consumed in different amounts have

Fine Framings, a small framing shop, uses markup pricing to arrive at a final selling price. The firm sells its frames at a price of $10, given a $6 unit cost. Fine Framings' markup on the selling price is ____, and its markup on cost is ____.

Sellers often decide to offer credit to borrowers because it helps with the exchange of purchased items.

Slow-paying credit accounts

Hillary wants to purchase refrigerator on credit. If she uses an installment plan, which of the following is most likely to occur?

Information Express is a privately owned and operated organization that collects credit information on business firms. After the organization analyzes and evaluates the data, it makes credit ratings available to client companies for a fee. Information Express is a

All of the following are reasons for implementing a penetration pricing strategy except

The Entrepreneurial Life

Entrepreneurial Integrity and Ethics

Getting Started

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Human Resources Plan: Managers, Owners, Allies, and Directors

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product and Supply Chain Management

Promotional Planning

Global Opportunities for Small Business

Professional Management in the Entrepreneurial Firm

Managing Human Resources

Managing Operations

Managing the Firms Assets

Managing Risk in the Small Business

Filters

Active Feet, a small manufacturer of shoes, hired an additional vice-president and purchased a barrel of synthetic rubber used to make shoe soles. These two expenses should be considered a (an) and a (an) , respectively.

Fine Framings, a small framing shop, uses markup pricing to arrive at a final selling price. The firm sells its frames at a price of $10, given a $6 unit cost. Fine Framings' markup on the selling price is , and its markup on cost is .