Exam 16: Pricing and Credit Decisions

The salesman told Todd that the high price of the dealerships' automobiles was indicative of their high quality. The dealership is using a ____ pricing strategy.

Break-even analysis is an accurate tool for pricing because it points directly to the correct price for a given product.

Credit sales ____ the amount of working capital needed by the business doing the selling.

Because the method takes into consideration both fixed and variable costs, average pricing is always an appropriate pricing approach for small businesses.

A comprehensive break-even analysis entails

Handyman Hardware, a small community-based store, offers its consumers the option of using credit. Creditworthy individuals are able to use the "HH Credit Card" for all purchases up to a credit limit of $1,000. Consumers are required to pay at least 20 percent of their outstanding balance at the end of each month. A two percent finance charge is assessed on the unpaid balance at the end of each billing cycle. Handyman Hardware is employing ____ in its business.

You Make the Call-Situation 2 Tom Anderson started his records storage business in the New York metropolitan area in 1991. His differentiation strategy was to offer competitive prices while providing state-of-the-art technology, easy access to his warehouse, and, of course, great service. After opening the business, Anderson learned that most potential customers had already signed long-term storage contracts with competitors. These contracts included a removal fee for each box permanently removed from the storage company's warehouse, making it difficult for customers to consider switching. Anderson believes that the survival of his company hinges on his view of what the essence of his business is. In other words, is he operating a storage company or a real estate business? He is convinced that he must answer this question before making any decision regarding pricing strategy.

When a small business markets a line of products, some of which may compete with one another, pricing decisions must take into account the effects of a single product price on the rest of the line.

The competitive advantage of a firm will affect consumers' demand for its product.

Credit granted by retailers to final consumers who purchase for personal or family use is referred to as

Within the context of a price lining strategy, the inventory level of the different lines depends directly on the ____ of the store's customers.

You Make the Call-Situation 1 Steve Jones is the 35-year-old owner of a highly competitive small business that supplies temporary office help. Like most businesspeople, he is always looking for ways to increase profit. However, the nature of his competition makes it very difficult to raise prices for the temps' services, while reducing their wages makes recruiting difficult. Jones has, nevertheless, found an area-bad debts-in which improvement should increase profits. A friend and business consultant met with Jones to advise him on credit management policies. Jones was pleased to get this friend's advice, as bad debts were costing him about 2 percent of sales. Currently, Jones has no system for managing credit.

Because small businesses are small by definition, pricing and credit considerations are relatively unimportant to their overall performance.

Setting prices for products or services using a particular competitor as a model of reference is known as a

One of the benefits of extending credit to borrowers is that doing so provides better records of purchases on credit billing statements.

Markups may be expressed as a percentage of either the firm's cost or the industry-standard cost.

The primary purposes of the Equal Credit Opportunity Act are to inform consumers about terms of a credit agreement and to require creditors to specify how finance charges are computed.

Gomez is pricing his products at a lower than normal, long-range market price in order to gain more rapid market acceptance. He is using a ____ strategy.

A small business in competition with larger firms is seldom in a position to function as a price leader.

The seller's measure of what he or she is willing to receive in exchange for transferring ownership or use of a product or service is known as