Exam 19: Pricing Concepts

Profit maximization occurs when:

If a shopping bot steers you to an exceptionally low price,you should suspect Internet fraud.

Name two advantages and two disadvantages associated with the use of break-even analysis.

_____ is a company's product sales as a percentage of total sales for that industry.

When pricing goals are mainly sales oriented,cost considerations usually dominate.

All of the following statements about price are true EXCEPT:

Which of the following statements describes a limitation associated with break-even analysis?

_____ costs do not change as output is increased or decreased.

_____ cost is the change in total costs associated with a one-unit change in output.

Your Memory Lane produce custom-made art prints that include graphics and icons to celebrate life's special moments.For example,on his wedding anniversary David had an art print produced that celebrated highlights of his ten years with his wife,Kathy.Suppose Your Memory Lane sells the custom artwork for $500.It estimates its average variable costs to be $200 per unit produced.It figures its fixed costs to be $900,000 per year.How many prints does it have to sell to break even?

Money that is left over after paying for company activities is called:

Fixed cost contribution equals:

Smelly Fruit At first glance there is little to like about the durian.The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside.When confronted with the durian for the first time,the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure.However,the durian is so popular in Thailand that one variety of the durian fruit,called the Kan Yao,has been selling for as high as $200.Even at that price,supply of the Kan Yao cannot keep up with demand.There are approximately 30 varieties of the durian grown in Thailand,with the most plentiful selling in the $15 range.The yellow flesh of the durian,the part you eat,has very powerful smell,but possesses a sweet,nutty taste that Thais cannot seem to get enough of at any price. -Refer to Smelly Fruit.At $200 per Kan Yao demand for the fruit appears to be higher than supply.Suppose at a price of $225,the amount demanded exactly meets the amount farmers are willing and able to supply.In this case the $225 price would be considered the _____ price.

When price decreases and total revenue falls,demand is:

For a nail salon,the costs associated with the purchase of nail polish and other products like nail polish remover,sterilized equipment,laundry service for the towels,and the beverages given to customers,are all examples of _____ costs.

Consumers' responsiveness or sensitivity to changes in prices is known as:

A company using market share pricing has a _____ pricing objective.

Specialty Cakes Imagine you're planning an after-symphony fund-raising party,and you need a life-size grand piano cake.Or,you are a developer proposing a new shopping center to a group of investors,and you want to serve a cake shaped like an architectural rendition of the center.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano for a gala in Macon,Georgia.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike. -Refer to Specialty Cakes.To set the price of her cakes,Cecilia simply doubles her costs,which often include several hours of labor and expensive raw materials.This method of price setting is called:

What is a break-even point? The Catera Company makes and sells cotton candy machines.What is the break-even volume for Catera machines in units? $\quad$$\quad$$\quad$$\underline{\text {Catera Machunes Financial Information}}$ Salesperson salary \ 40,000 Advertising 100,000 Research and development 20,000 Production equipment 20,000 Overhead allocation 20,000 Catera's selling price \6 00 Average variable cost \3 50

The owner of Buffalo Mountain Coffee Shop pays the same amount in rent each month no matter how many customers she serves.The shop owner's rent is an example of a marginal cost.