Exam 20: Setting the Right Price

Nellie Tompkins is the owner and operator of Hot Mamma Salsa,which she sells at craft festivals.She only makes and sells three types of salsa--peach,pear,and pineapple.The joint costs of leasing her professional kitchen for manufacturing,travel to craft shows,insurance,and so on are allocated on an equal basis to the three types of salsas sold.Last year's sales figures and allocated joint costs follow.Should Hot Mamma Salsa stop selling its pear salsa? Why or why not?

All of the following contribute to profitability during Black Friday sales except __________.

Leader pricing is used to:

Consumers sometimes prefer two-part pricing because:

Name one advantage and one disadvantage associated with using each of the three basic pricing methods.

With value-based pricing:

The owner of a neighborhood hardware store has decided to sell a set of three padlocks for $5.He hopes the below-cost price for the locks will attract current and new customers who will also buy regularly priced items.The owner is encouraging store patronage through:

Name and describe the three basic strategies for setting a price on a new good or service.Under what conditions is each of the three basic pricing methods successful?

The first step in setting the right price for a new product is to estimate demand,costs,and profits.

Sometimes managers price their products too low,resulting in a loss of company profits.One reason this happens is that:

All of the following are geographic pricing methods EXCEPT:

Single-price selling:

JCPenney sends representatives to shop at similar retailers to make sure it is charging comparable prices for its products.JCPenney probably uses a _____ strategy.

When the Mosquito Magnet was introduced,it was designed to rid the immediate area of mosquitoes and other annoying insects.The technology for the Mosquito Magnet had taken years to develop.It is a patented grill-like apparatus that emits carbon dioxide to attract bugs to a fan that draws them into the device where they die.What type of pricing policy would you recommend the company use to introduce this product to the market?

When a buyer pays a lower price for buying multiple units or above a specified dollar amount for a single order,the buyer is receiving a _____ discount.

A 16-ounce bottle of Prairie Herb vinegar sells for $4.95,and a 16-ounce bottle of Heinz vinegar costs $1.05.Prairie Herb vinegar is new to the market,perceived to be of higher quality,and provides a unique flavor to foods even though it is used in the same way as Heinz vinegar.Prairie Herb vinegar is most likely using a _____ policy.

If a manufacturer designates a shipping point from which to calculate all freight charges and charges customers the freight costs from that point (even if the goods were shipped from another location),the manufacturer is using _____ pricing.

The price skimming strategy is sometimes called a "market-plus" approach to pricing because it denotes a high price relative to the prices of competing products.This strategy works best when:

Art Supplies It's September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter's elementary school.In her Sunday newspaper was a flyer from Michaels,an arts and crafts retailer.As she looked through the newspaper insert,she noticed that if she purchased three or more bottles of Alene's Tacky Glue,the regular price of $1.50 each was reduced to $1.15 each.She also saw that the store priced its plastic storage boxes at $1.99,$3.99,and $5.99.She thought they would be useful for storing each child's projects.On the front page of the flyer was an ad for Funky Girls Gel Pens,something she knew her daughter would love to use.The price at Michael's was $6.99 lower than the price she had found at the other stores that carried the pens.She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michaels had a scrapbook starter kit,which includes scissors,book,pages,and stickers for only $15.The items could be purchased separately for $19.99.The flyer also announced that all flag-related items leftover from its Fourth of July sale were reduced by 40 percent. -Refer to Art Supplies.Which type of discount is being used to price the tacky glue?

Functional discounts are typically calculated as the wholesale price times the accumulated margin percentages.