Question 1

If a firm's total fixed cost is $400,000 and its fixed-cost contribution per unit is $10,its break-even in units is

Accepted Answer

A) 30,000. 
B) 40,000. 
C) 10,000. 
D) 20,000. 
E) This cannot be determined with the information provided. 
A) 30,000. 
B) 40,000. 
C) 10,000. 
D) 20,000. 
E) This cannot be determined with the information provided.

Question 2

Use this information for questions that refer to the Sporting Products,Inc.(SPI)case. Randy Todd,marketing manager for Sporting Products,Inc.(SPI),is thinking about how changes taking place among retailers in his channel might impact his strategy.
SPI sells the products it produces through wholesalers and retailers.For example,SPI sells basketballs to Wholesale Supply for $8.00.Wholesale Supply uses a 20 percent markup,and most of its "sport shop" retailer customers,like Robinson's Sporting Goods,use a 33 percent markup to arrive at the price they charge final consumers.However,one fast-growing retail chain,Sports Depot,uses only a 20 percent markup for basketballs,even though it pays Wholesale Supply the same price as other retailers.Furthermore,Sports Depot occasionally lowers the price of basketballs and sells them at cost,to draw customers into its stores and stimulate sales of its pricey basketball shoes.
Sports Depot is also using other pricing approaches that are different from the sports shops that usually handle SPI products.For example,Sports Depot prices all its baseball gloves at $20,$40,or $60-with no prices in between.There are three big bins,one for each price point.
Randy is also curious about how Sports Depot's new strategy to increase sales of tennis balls will work out.The basic idea is to sell tennis balls in large quantities to nonprofit groups,who resell the balls to raise money.For example,a service organization at a local college bought 2,000 tennis balls printed with the college logo.Sports Depot charged $.50 each for the tennis balls,plus a $500 one-time charge for the stamp to print the logo.The service group plans to resell the tennis balls for $2.50 each and contribute the profits to a shelter for the homeless.
Randy is not certain if Sports Depot's ideas will affect SPI's plans.For example,SPI is considering adding tennis racquets to the lines it produces.This would require a $500,000 addition to its factory,as well as the purchase of new equipment that costs $1,000,000.The variable cost to produce a tennis racquet would be $20,but Todd thinks that SPI could sell the racquet at a wholesale price of $40 each.That would allow most retailers to add their normal markup and make a profit.However,Sports Depot may sells the racquet at a lower than normal price.
How many of the printed tennis balls must the service organization sell to cover the $500 fixed printing charge?

Accepted Answer

A) 250 
B) 400 
C) 500 
D) 1,000 
E) 2,000 
A) 250 
B) 400 
C) 500 
D) 1,000 
E) 2,000

Question 3

Average cost is obtained by dividing

Accepted Answer

A) total fixed cost by the related quantity. 
B) marginal cost by marginal revenue. 
C) total cost by the related quantity. 
D) average fixed cost and average variable cost by the quantity produced. 
E) total variable cost by the related quantity. 
A) total fixed cost by the related quantity. 
B) marginal cost by marginal revenue. 
C) total cost by the related quantity. 
D) average fixed cost and average variable cost by the quantity produced. 
E) total variable cost by the related quantity.

Question 4

Which of the following describes a characteristic of leader pricing?

Accepted Answer

A) It seeks a big profit on the leader items. 
B) It is usually used for a retailer's major product line,to give it a competitive advantage. 
C) It is different from bait pricing in that the marketing manager really expects to sell leader priced items. 
D) It assumes that some part of the demand curve is upward sloping to the right. 
E) It is banned in interstate commerce. 
A) It seeks a big profit on the leader items. 
B) It is usually used for a retailer's major product line,to give it a competitive advantage. 
C) It is different from bait pricing in that the marketing manager really expects to sell leader priced items. 
D) It assumes that some part of the demand curve is upward sloping to the right. 
E) It is banned in interstate commerce.

Question 5

Which of the following statements is true about marginal analysis?

Accepted Answer

A) It assumes that the firm's total revenue curve is a straight line. 
B) It bases the analysis on the cost of the first few units sold. 
C) It explicitly considers demand when calculating price. 
D) It takes into account the break-even point. 
E) It focuses on the highest price per unit. 
A) It assumes that the firm's total revenue curve is a straight line. 
B) It bases the analysis on the cost of the first few units sold. 
C) It explicitly considers demand when calculating price. 
D) It takes into account the break-even point. 
E) It focuses on the highest price per unit.

Question 6

A firm with a stockturn rate of 5 that sells products that cost it $150,000 per year is keeping an average of ________ worth of inventory.

Accepted Answer

A) $75,000 
B) $150,000 
C) $750,000 
D) $4,000 
E) $30,000 
A) $75,000 
B) $150,000 
C) $750,000 
D) $4,000 
E) $30,000

Question 7

As output increases,average cost decreases continually because

Accepted Answer

A) average variable cost per unit is increasing. 
B) average fixed cost per unit is decreasing. 
C) total variable cost is increasing. 
D) total variable cost is decreasing. 
E) total fixed cost is reducing. 
A) average variable cost per unit is increasing. 
B) average fixed cost per unit is decreasing. 
C) total variable cost is increasing. 
D) total variable cost is decreasing. 
E) total fixed cost is reducing.

Question 8

Which of the following is a weakness of the average-cost approach?

Accepted Answer

A) It ignores competitors' costs and prices. 
B) It does not consider historical values. 
C) It does not add a reasonable markup to the average cost of a product. 
D) It is not commonly used. 
E) It is a complex method. 
A) It ignores competitors' costs and prices. 
B) It does not consider historical values. 
C) It does not add a reasonable markup to the average cost of a product. 
D) It is not commonly used. 
E) It is a complex method.

Question 9

A producer with only one product has total fixed costs of $15,000 per month.In addition,it cost the producer $100 in variable costs to produce each unit of his product (raw materials and direct labor cost).The producer charges his wholesalers $125 per unit.What is the sales amount to break even?

Accepted Answer

A) $70,000 
B) $75,000 
C) $80,000 
D) $85,000 
E) $90,000 
A) $70,000 
B) $75,000 
C) $80,000 
D) $85,000 
E) $90,000

Question 10

Average-cost pricing may lead to losses because there are a variety of costs,and each changes in a(n)

Accepted Answer

A) similar fashion. 
B) different way as output changes. 
C) similar fashion with time. 
D) exponential manner. 
E) highly predictable and similar manner. 
A) similar fashion. 
B) different way as output changes. 
C) similar fashion with time. 
D) exponential manner. 
E) highly predictable and similar manner.

Question 11

The two basic approaches to price setting are

Accepted Answer

A) supply-oriented and demand-oriented. 
B) cost-oriented and demand-oriented. 
C) sales-oriented and profit-oriented. 
D) cost-oriented and profit-oriented. 
E) average-cost pricing and break-even analysis. 
A) supply-oriented and demand-oriented. 
B) cost-oriented and demand-oriented. 
C) sales-oriented and profit-oriented. 
D) cost-oriented and profit-oriented. 
E) average-cost pricing and break-even analysis.

Question 12

A firm that is using marginal analysis to set prices finds that setting a price of $180 per unit would result in the sale of 6 units.The total variable cost of production is equal to $300 and total fixed cost is equal to $150.In this case,the firm's total revenue will be

Accepted Answer

A) $900. 
B) $1,800. 
C) $1,980. 
D) $1,620. 
E) $1,080. 
A) $900. 
B) $1,800. 
C) $1,980. 
D) $1,620. 
E) $1,080.

Question 13

It makes sense for a manager to use leader pricing on a product only if consumers are unlikely to be aware of the normal price.

Accepted Answer

A) True 
 B)False

Question 14

The text says markups

Accepted Answer

A) should always be stated as a percentage of cost. 
B) are a percentage of selling price-unless otherwise stated. 
C) are never stated as a percentage of cost. 
D) should never be stated in dollar amounts. 
E) None of these answers is correct. 
A) should always be stated as a percentage of cost. 
B) are a percentage of selling price-unless otherwise stated. 
C) are never stated as a percentage of cost. 
D) should never be stated in dollar amounts. 
E) None of these answers is correct.

Question 15

A company that produces baseball caps has fixed costs of $100,000,and total variable costs of $40,000 for a production volume of 20,000 units.The average variable cost per unit is

Accepted Answer

A) $5.00. 
B) $2.50. 
C) $0.20. 
D) $0.40. 
E) $2.00. 
A) $5.00. 
B) $2.50. 
C) $0.20. 
D) $0.40. 
E) $2.00.

Question 16

Which of the following statements is true about marginal analysis?

Accepted Answer

A) It reveals the range of prices that should be profitable. 
B) It can be used to set prices,but it does not give you any idea what quantity might be sold at that price. 
C) It does not need an estimate of the demand curve. 
D) It usually suggests the same price as break-even analysis. 
E) It focuses on the highest number of units to be sold. 
A) It reveals the range of prices that should be profitable. 
B) It can be used to set prices,but it does not give you any idea what quantity might be sold at that price. 
C) It does not need an estimate of the demand curve. 
D) It usually suggests the same price as break-even analysis. 
E) It focuses on the highest number of units to be sold.

Question 17

Some consumers maintain a price-quality association,meaning that if a product has a high price,they assume the product must have high quality.This price-quality association is the basis for the use of

Accepted Answer

A) odd-even pricing. 
B) prestige pricing. 
C) leader pricing. 
D) reference pricing. 
E) price lining. 
A) odd-even pricing. 
B) prestige pricing. 
C) leader pricing. 
D) reference pricing. 
E) price lining.

Question 18

Leader pricing is normally used with products for which consumers do have a specific reference price.

Accepted Answer

A) True 
 B)False

Question 19

A sales rep is paid a commission on each product sold.The commission is

Accepted Answer

A) part of the total fixed cost. 
B) part of the total variable cost. 
C) not included in figuring average cost. 
D) part of the total cost,but not specifically a fixed cost or a variable cost. 
E) None of these answers is correct. 
A) part of the total fixed cost. 
B) part of the total variable cost. 
C) not included in figuring average cost. 
D) part of the total cost,but not specifically a fixed cost or a variable cost. 
E) None of these answers is correct.

Question 20

What is the best pricing tool marketers have for looking at costs and revenue at the same time?

Accepted Answer

A) break-even analysis 
B) markdown approach 
C) average-cost pricing method 
D) marginal analysis 
E) markup approach 
A) break-even analysis 
B) markdown approach 
C) average-cost pricing method 
D) marginal analysis 
E) markup approach

If a firm's total fixed cost is $400,000 and its fixed-cost contribution per unit is $10,its break-even in units is

Average cost is obtained by dividing

Which of the following describes a characteristic of leader pricing?

Which of the following statements is true about marginal analysis?

A firm with a stockturn rate of 5 that sells products that cost it $150,000 per year is keeping an average of ________ worth of inventory.

As output increases,average cost decreases continually because

Which of the following is a weakness of the average-cost approach?

A producer with only one product has total fixed costs of $15,000 per month.In addition,it cost the producer $100 in variable costs to produce each unit of his product (raw materials and direct labor cost).The producer charges his wholesalers $125 per unit.What is the sales amount to break even?

Average-cost pricing may lead to losses because there are a variety of costs,and each changes in a(n)

The two basic approaches to price setting are

A firm that is using marginal analysis to set prices finds that setting a price of $180 per unit would result in the sale of 6 units.The total variable cost of production is equal to $300 and total fixed cost is equal to $150.In this case,the firm's total revenue will be

It makes sense for a manager to use leader pricing on a product only if consumers are unlikely to be aware of the normal price.

The text says markups

A company that produces baseball caps has fixed costs of $100,000,and total variable costs of $40,000 for a production volume of 20,000 units.The average variable cost per unit is

Which of the following statements is true about marginal analysis?

Some consumers maintain a price-quality association,meaning that if a product has a high price,they assume the product must have high quality.This price-quality association is the basis for the use of

Leader pricing is normally used with products for which consumers do have a specific reference price.

A sales rep is paid a commission on each product sold.The commission is

What is the best pricing tool marketers have for looking at costs and revenue at the same time?

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Market Environment

Focusing Marketing Strategy With Segmentation and Positioning

Final Consumers and Their Buying Behavior

Business and Organizational Customers and Their Buying Behavior

Improving Decisions With Marketing Information

Elements of Product Planning for Goods and Services

Product Management and New-Product Development

Place and Development of Channel Systems

Distribution Customer Service and Logistics

Retailers, Wholesalers, and Their Strategy Planning

Promotionintroduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising and Sales Promotion

Publicity: Promotion Using Earned Media, Owned Media, and Social Media

Pricing Objectives and Policies

Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

Filters

Exam 18: Price Setting in the Business World

If a firm's total fixed cost is $400,000 and its fixed-cost contribution per unit is $10,its break-even in units is

Average cost is obtained by dividing

Which of the following describes a characteristic of leader pricing?

Which of the following statements is true about marginal analysis?

A firm with a stockturn rate of 5 that sells products that cost it $150,000 per year is keeping an average of ________ worth of inventory.

As output increases,average cost decreases continually because

Which of the following is a weakness of the average-cost approach?

A producer with only one product has total fixed costs of $15,000 per month.In addition,it cost the producer $100 in variable costs to produce each unit of his product (raw materials and direct labor cost).The producer charges his wholesalers $125 per unit.What is the sales amount to break even?

Average-cost pricing may lead to losses because there are a variety of costs,and each changes in a(n)

The two basic approaches to price setting are

A firm that is using marginal analysis to set prices finds that setting a price of $180 per unit would result in the sale of 6 units.The total variable cost of production is equal to $300 and total fixed cost is equal to $150.In this case,the firm's total revenue will be

It makes sense for a manager to use leader pricing on a product only if consumers are unlikely to be aware of the normal price.

The text says markups

A company that produces baseball caps has fixed costs of $100,000,and total variable costs of $40,000 for a production volume of 20,000 units.The average variable cost per unit is

Which of the following statements is true about marginal analysis?

Some consumers maintain a price-quality association,meaning that if a product has a high price,they assume the product must have high quality.This price-quality association is the basis for the use of

Leader pricing is normally used with products for which consumers do have a specific reference price.

A sales rep is paid a commission on each product sold.The commission is

What is the best pricing tool marketers have for looking at costs and revenue at the same time?

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Market Environment

Focusing Marketing Strategy With Segmentation and Positioning

Final Consumers and Their Buying Behavior

Business and Organizational Customers and Their Buying Behavior

Improving Decisions With Marketing Information

Elements of Product Planning for Goods and Services

Product Management and New-Product Development

Place and Development of Channel Systems

Distribution Customer Service and Logistics

Retailers, Wholesalers, and Their Strategy Planning

Promotionintroduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising and Sales Promotion

Publicity: Promotion Using Earned Media, Owned Media, and Social Media

Pricing Objectives and Policies

Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

Filters