Question 1

_____ are costs that a customer faces by buying a product that is different from what has been purchased or used in the past.

Accepted Answer

A)  Marginal costs 
B)  First-mover costs 
C)  Switching costs 
D)  Pioneering costs 
E)  Opportunity costs 
A)  Marginal costs 
B)  First-mover costs 
C)  Switching costs 
D)  Pioneering costs 
E)  Opportunity costs

Question 2

The total fixed costs are $10,000, and the average variable cost per unit is $3. For a production volume of 10,000 units, the average cost per unit is

Accepted Answer

A)  $3.00 
B)  $1.00 
C)  $4.00 
D)  $3.30 
E)  $10.00 
A)  $3.00 
B)  $1.00 
C)  $4.00 
D)  $3.30 
E)  $10.00

Question 3

Use this information for question 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, only uses 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 of its baseball gloves at $20, $40, or $60-with no prices in between. There are three big bins - one for each price point.
Todd 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.
Todd is not certain if Sports Depot 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, if Sports Depot sells the racquet at a lower than normal price other retailers might decide to carry it.
The pricing approach Sports Depot uses to price its baseball gloves is called:

Accepted Answer

A)  odd-even pricing. 
B)  value in use pricing. 
C)  prestige pricing. 
D)  bait pricing. 
E)  price lining. 
A)  odd-even pricing. 
B)  value in use pricing. 
C)  prestige pricing. 
D)  bait pricing. 
E)  price lining.

Question 4

Which of the following statements is true about average cost-pricing?

Accepted Answer

A)  It can result in losses if actual sales are higher than expected. 
B)  It is more profitable if actual sales are lower than expected. 
C)  It does not take the demand curve into account when setting prices. 
D)  It works better in practice than it does in theory. 
E)  It can be used to set a price without an estimate of the quantity to be sold. 
A)  It can result in losses if actual sales are higher than expected. 
B)  It is more profitable if actual sales are lower than expected. 
C)  It does not take the demand curve into account when setting prices. 
D)  It works better in practice than it does in theory. 
E)  It can be used to set a price without an estimate of the quantity to be sold.

Question 5

The typical markup (percent) is the:

Accepted Answer

A)  cost of an item divided by its selling price-times 100. 
B)  selling price minus the cost of the item, divided by the cost of the item-times 100. 
C)  selling price of an item, divided by its cost-times 100. 
D)  selling price minus the cost of the item, divided by the selling price-times 100. 
E)  selling price minus the cost of the item, divided by the average fixed cost-times 100. 
A)  cost of an item divided by its selling price-times 100. 
B)  selling price minus the cost of the item, divided by the cost of the item-times 100. 
C)  selling price of an item, divided by its cost-times 100. 
D)  selling price minus the cost of the item, divided by the selling price-times 100. 
E)  selling price minus the cost of the item, divided by the average fixed cost-times 100.

Question 6

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 alternatives 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 alternatives is correct.

Question 7

A producer incurred costs of $54,000 for labor and materials and $26,000 for fixed overhead expenses in a year. The firm produced 20,000 units during the year. If the producer desires a profit of $1 per unit in the coming year, what should the producer's selling price be using average-cost pricing?

Accepted Answer

A)  $3.70. 
B)  $2.30. 
C)  $5.00. 
D)  $6.00. 
E)  Cannot be determined from the information provided. 
A)  $3.70. 
B)  $2.30. 
C)  $5.00. 
D)  $6.00. 
E)  Cannot be determined from the information provided.

Question 8

Average-cost pricing guarantees that the firm will earn enough to at least cover its costs.

Accepted Answer

A) True 
 B)False

Question 9

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using

Accepted Answer

A)  complementary product pricing. 
B)  product-bundle pricing. 
C)  price lining. 
D)  bait pricing. 
E)  cost plus pricing. 
A)  complementary product pricing. 
B)  product-bundle pricing. 
C)  price lining. 
D)  bait pricing. 
E)  cost plus pricing.

Question 10

The number of times an intermediary's average inventory is sold in a year is called the:

Accepted Answer

A)  stockturn rate. 
B)  asset factor. 
C)  inventory ratio. 
D)  markup ratio. 
E)  ROI (return on inventory). 
A)  stockturn rate. 
B)  asset factor. 
C)  inventory ratio. 
D)  markup ratio. 
E)  ROI (return on inventory).

Question 11

A firm that sets prices such that consumers will save 15% of their fuel costs by buying its products is employing _____.

Accepted Answer

A)  leader pricing 
B)  value in use pricing 
C)  odd-even pricing 
D)  price lining 
E)  product-bundle pricing 
A)  leader pricing 
B)  value in use pricing 
C)  odd-even pricing 
D)  price lining 
E)  product-bundle pricing

Question 12

You are considering opening a fast-food store. Your fixed costs for the required land, building, parking lot paving, kitchen equipment, and neon sign will be $1,000,000. The variable cost will be $1.89 for servings which will sell for $2.89. How many servings must you sell to break even?

Accepted Answer

A)  1,000,000 
B)  1,200,000 
C)  2,890,000 
D)  189,000 
E)  Cannot be determined from the data given. 
A)  1,000,000 
B)  1,200,000 
C)  2,890,000 
D)  189,000 
E)  Cannot be determined from the data given.

Question 13

Good Health Co. has set a suggested retail list price of $40 on its new vitamin tablets on the assumption that its target market will find the product attractive at this price. From this suggested retail list price, Good Health has subtracted its usual chain of markups for wholesalers and retailers to obtain its own selling price of $17. This is:

Accepted Answer

A)  demand-backward pricing. 
B)  full-line pricing. 
C)  average-cost pricing. 
D)  odd-even pricing. 
E)  prestige pricing. 
A)  demand-backward pricing. 
B)  full-line pricing. 
C)  average-cost pricing. 
D)  odd-even pricing. 
E)  prestige pricing.

Question 14

A producer sells an item to a wholesaler for $4.00, and the wholesaler uses a markup of 25 percent on its selling price and the retailer uses a markup of 30 percent on its selling price. What will be the retailer's selling price to its customers?

Accepted Answer

A)  $7.61 
B)  $7.55 
C)  $7.36 
D)  $7.24 
E)  $7.12 
A)  $7.61 
B)  $7.55 
C)  $7.36 
D)  $7.24 
E)  $7.12

Question 15

Leader pricing is typically used with well-known, widely used items which are not stocked heavily by consumers.

Accepted Answer

A) True 
 B)False

Question 16

Use this information for question 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, only uses 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 of its baseball gloves at $20, $40, or $60-with no prices in between. There are three big bins - one for each price point.
Todd 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.
Todd is not certain if Sports Depot 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, if Sports Depot sells the racquet at a lower than normal price other retailers might decide to carry it.
What is the service organization's average cost for the printed tennis balls it buys from Sports Depot?

Accepted Answer

A)  $.50 
B)  $.75 
C)  $.95 
D)  $1.50 
E)  $2.00 
A)  $.50 
B)  $.75 
C)  $.95 
D)  $1.50 
E)  $2.00

Question 17

When customers have to pay the bill themselves, they are likely to be more price sensitive.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following observations concerning a "reference price" is true?

Accepted Answer

A)  Reference price is the company's cost to produce the product. 
B)  Reference price is set by regulators. 
C)  Demand may increase if a firm's price is lower than a customer's reference price. 
D)  All customers have the same reference prices for the same basic type of purchase. 
A)  Reference price is the company's cost to produce the product. 
B)  Reference price is set by regulators. 
C)  Demand may increase if a firm's price is lower than a customer's reference price. 
D)  All customers have the same reference prices for the same basic type of purchase.

Question 19

The text says "markup" means percent of:

Accepted Answer

A)  "mark-on." 
B)  selling price-unless otherwise stated. 
C)  fixed cost. 
D)  delivered cost-unless otherwise stated. 
E)  cost of sales. 
A)  "mark-on." 
B)  selling price-unless otherwise stated. 
C)  fixed cost. 
D)  delivered cost-unless otherwise stated. 
E)  cost of sales.

Question 20

A firm with a stockturn rate of 5 sells products that cost it $100,000. Its annual inventory carrying cost is about 20 percent of the inventory value. What is its annual inventory carrying cost?

Accepted Answer

A)  $5,000 
B)  $4,000 
C)  $8,000 
D)  $20,000 
E)  $100,000 
A)  $5,000 
B)  $4,000 
C)  $8,000 
D)  $20,000 
E)  $100,000

_____ are costs that a customer faces by buying a product that is different from what has been purchased or used in the past.

The total fixed costs are $10,000, and the average variable cost per unit is $3. For a production volume of 10,000 units, the average cost per unit is

Which of the following statements is true about average cost-pricing?

The typical markup (percent) is the:

The text says "markups":

A producer incurred costs of $54,000 for labor and materials and $26,000 for fixed overhead expenses in a year. The firm produced 20,000 units during the year. If the producer desires a profit of $1 per unit in the coming year, what should the producer's selling price be using average-cost pricing?

Average-cost pricing guarantees that the firm will earn enough to at least cover its costs.

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using

The number of times an intermediary's average inventory is sold in a year is called the:

A firm that sets prices such that consumers will save 15% of their fuel costs by buying its products is employing _____.

You are considering opening a fast-food store. Your fixed costs for the required land, building, parking lot paving, kitchen equipment, and neon sign will be $1,000,000. The variable cost will be $1.89 for servings which will sell for $2.89. How many servings must you sell to break even?

A producer sells an item to a wholesaler for $4.00, and the wholesaler uses a markup of 25 percent on its selling price and the retailer uses a markup of 30 percent on its selling price. What will be the retailer's selling price to its customers?

Leader pricing is typically used with well-known, widely used items which are not stocked heavily by consumers.

When customers have to pay the bill themselves, they are likely to be more price sensitive.

Which of the following observations concerning a "reference price" is true?

The text says "markup" means percent of:

A firm with a stockturn rate of 5 sells products that cost it $100,000. Its annual inventory carrying cost is about 20 percent of the inventory value. What is its annual inventory carrying cost?

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

Promotion-Introduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising, Publicity, and Sales Promotion

Pricing Objectives and Policies

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

Filters

Exam 17: Price Setting in the Business World

_____ are costs that a customer faces by buying a product that is different from what has been purchased or used in the past.

The total fixed costs are $10,000, and the average variable cost per unit is $3. For a production volume of 10,000 units, the average cost per unit is

Which of the following statements is true about average cost-pricing?

The typical markup (percent) is the:

The text says "markups":

A producer incurred costs of $54,000 for labor and materials and $26,000 for fixed overhead expenses in a year. The firm produced 20,000 units during the year. If the producer desires a profit of $1 per unit in the coming year, what should the producer's selling price be using average-cost pricing?

Average-cost pricing guarantees that the firm will earn enough to at least cover its costs.

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using

The number of times an intermediary's average inventory is sold in a year is called the:

A firm that sets prices such that consumers will save 15% of their fuel costs by buying its products is employing _____.

You are considering opening a fast-food store. Your fixed costs for the required land, building, parking lot paving, kitchen equipment, and neon sign will be $1,000,000. The variable cost will be $1.89 for servings which will sell for $2.89. How many servings must you sell to break even?

A producer sells an item to a wholesaler for $4.00, and the wholesaler uses a markup of 25 percent on its selling price and the retailer uses a markup of 30 percent on its selling price. What will be the retailer's selling price to its customers?

Leader pricing is typically used with well-known, widely used items which are not stocked heavily by consumers.

When customers have to pay the bill themselves, they are likely to be more price sensitive.

Which of the following observations concerning a "reference price" is true?

The text says "markup" means percent of:

A firm with a stockturn rate of 5 sells products that cost it $100,000. Its annual inventory carrying cost is about 20 percent of the inventory value. What is its annual inventory carrying cost?

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

Promotion-Introduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising, Publicity, and Sales Promotion

Pricing Objectives and Policies

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

Filters