Question 1

In a typical break-even analysis, a firm's fixed-cost contribution per unit:

Accepted Answer

A)  is the assumed selling price per unit minus the variable cost per unit. 
B)  is the assumed selling price per unit minus the average fixed cost. 
C)  usually decreases as the quantity produced increases. 
D)  is total fixed cost divided by the quantity produced. 
E)  usually increases as the quantity produced increases. 
A)  is the assumed selling price per unit minus the variable cost per unit. 
B)  is the assumed selling price per unit minus the average fixed cost. 
C)  usually decreases as the quantity produced increases. 
D)  is total fixed cost divided by the quantity produced. 
E)  usually increases as the quantity produced increases.

Question 2

At break-even point (BEP),

Accepted Answer

A)  the firm's total revenue will equal its variable costs. 
B)  the firm's total sales will equal its total production. 
C)  the firm's total cost will equal its total revenue. 
D)  the firm's total profits will equal its total cost. 
E)  the firm's total variable costs equal its total fixed cost. 
A)  the firm's total revenue will equal its variable costs. 
B)  the firm's total sales will equal its total production. 
C)  the firm's total cost will equal its total revenue. 
D)  the firm's total profits will equal its total cost. 
E)  the firm's total variable costs equal its total fixed cost.

Question 3

Retailers who earn high profits generally use higher markups than retailers who have low profits.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of a variable cost for a producer?

Accepted Answer

A)  Depreciation 
B)  Managers' salaries 
C)  Rent 
D)  Packaging materials 
E)  Property taxes 
A)  Depreciation 
B)  Managers' salaries 
C)  Rent 
D)  Packaging materials 
E)  Property taxes

Question 5

Marginal analysis:

Accepted Answer

A)  can be very useful if a firm's pricing objective is profit maximization. 
B)  focuses on the last unit which will be sold. 
C)  can be used to find the most profitable price and quantity. 
D)  can help find the price that results in the greatest difference between total revenue and total cost. 
E)  All of these alternatives are correct. 
A)  can be very useful if a firm's pricing objective is profit maximization. 
B)  focuses on the last unit which will be sold. 
C)  can be used to find the most profitable price and quantity. 
D)  can help find the price that results in the greatest difference between total revenue and total cost. 
E)  All of these alternatives are correct.

Question 6

Cost-oriented selling price per unit is obtained by adding a firm's desired profit per unit to the average total cost.

Accepted Answer

A) True 
 B)False

Question 7

The greater the total expenditure, the less price sensitive customers are.

Accepted Answer

A) True 
 B)False

Question 8

A tire retailer is advertising a very low price on a popular size tire. When a customer comes into the store, the clerk says the low-priced item is sold out, and tries to convince the customer to buy the top-of-the-line model-claiming the low priced model is not a very good buy even at the low price. This is an example of:

Accepted Answer

A)  leader pricing. 
B)  full-line pricing. 
C)  value in use pricing. 
D)  price lining. 
E)  bait pricing. 
A)  leader pricing. 
B)  full-line pricing. 
C)  value in use pricing. 
D)  price lining. 
E)  bait pricing.

Question 9

A certain item has a production cost of $24. The manufacturer takes a 25 percent markup, the wholesaler takes a 20 percent markup, and the retailer takes a 50 percent markup. Therefore, the item has a retail selling price of $80.

Accepted Answer

A) True 
 B)False

Question 10

Business customers are sometimes less price sensitive if there are switching costs.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Marginal analysis focuses on the changes in average fixed cost per unit and average variable cost from selling one more unit to find the most profitable price and quantity.

Accepted Answer

A) True 
 B)False

Question 13

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. How many units of the product does the producer have to sell each month in order to break even?

Accepted Answer

A)  450 units 
B)  500 units 
C)  550 units 
D)  600 units 
E)  650 units 
A)  450 units 
B)  500 units 
C)  550 units 
D)  600 units 
E)  650 units

Question 14

All of the following observations concerning markups are true except

Accepted Answer

A)  they guide pricing by intermediaries. 
B)  they are used by most retailers and wholesalers to set prices. 
C)  they are a cost-oriented price setting approach. 
D)  they are usually stated as dollar amounts. 
E)  they are related to selling price for convenience. 
A)  they guide pricing by intermediaries. 
B)  they are used by most retailers and wholesalers to set prices. 
C)  they are a cost-oriented price setting approach. 
D)  they are usually stated as dollar amounts. 
E)  they are related to selling price for convenience.

Question 15

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.
If SPI produces tennis racquets, how many racquets must it sell at $40 to break even?

Accepted Answer

A)  50,000 
B)  60,000 
C)  75,000 
D)  100,000 
E)  none of these alternatives is correct. 
A)  50,000 
B)  60,000 
C)  75,000 
D)  100,000 
E)  none of these alternatives is correct.

Question 16

The price per unit is $1.00. The average variable cost per unit is 60 cents. The total fixed cost is $20,000. Compute the break-even point.

Accepted Answer

A)  75,000 units 
B)  50,000 units 
C)  20,000 units 
D)  33,334 units 
E)  40,000 units 
A)  75,000 units 
B)  50,000 units 
C)  20,000 units 
D)  33,334 units 
E)  40,000 units

Question 17

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.
How could Randy Todd use break-even analysis with his tennis racquet decision?

Accepted Answer

A)  To reveal the combination of quantity and price that gives the highest profit 
B)  To set the most profitable price 
C)  To estimate future sales 
D)  To compare the break-even quantity for different prices with the likely level of demand 
E)  To determine Wholesale Supply's likely selling price 
A)  To reveal the combination of quantity and price that gives the highest profit 
B)  To set the most profitable price 
C)  To estimate future sales 
D)  To compare the break-even quantity for different prices with the likely level of demand 
E)  To determine Wholesale Supply's likely selling price

Question 18

A firm's total cost increases only when its variable cost increases.

Accepted Answer

A) True 
 B)False

Question 19

A computer store regularly advertises a very low price for a well-known brand of disks. When the customers come in, however, the salespeople point out the disadvantages of this particular brand and try to persuade them to buy other disks at much higher prices. This retailer is using:

Accepted Answer

A)  bait pricing. 
B)  odd-even pricing. 
C)  psychological pricing. 
D)  leader pricing. 
E)  price lining. 
A)  bait pricing. 
B)  odd-even pricing. 
C)  psychological pricing. 
D)  leader pricing. 
E)  price lining.

Question 20

Average-cost pricing works best in situations where demand conditions do not change a lot.

Accepted Answer

A) True 
 B)False

In a typical break-even analysis, a firm's fixed-cost contribution per unit:

At break-even point (BEP),

Retailers who earn high profits generally use higher markups than retailers who have low profits.

Which of the following is an example of a variable cost for a producer?

Marginal analysis:

Cost-oriented selling price per unit is obtained by adding a firm's desired profit per unit to the average total cost.

The greater the total expenditure, the less price sensitive customers are.

A certain item has a production cost of $24. The manufacturer takes a 25 percent markup, the wholesaler takes a 20 percent markup, and the retailer takes a 50 percent markup. Therefore, the item has a retail selling price of $80.

Business customers are sometimes less price sensitive if there are switching costs.

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 _____.

Marginal analysis focuses on the changes in average fixed cost per unit and average variable cost from selling one more unit to find the most profitable price and quantity.

All of the following observations concerning markups are true except

The price per unit is $1.00. The average variable cost per unit is 60 cents. The total fixed cost is $20,000. Compute the break-even point.

A firm's total cost increases only when its variable cost increases.

A computer store regularly advertises a very low price for a well-known brand of disks. When the customers come in, however, the salespeople point out the disadvantages of this particular brand and try to persuade them to buy other disks at much higher prices. This retailer is using:

Average-cost pricing works best in situations where demand conditions do not change a lot.

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

In a typical break-even analysis, a firm's fixed-cost contribution per unit:

At break-even point (BEP),

Retailers who earn high profits generally use higher markups than retailers who have low profits.

Which of the following is an example of a variable cost for a producer?

Marginal analysis:

Cost-oriented selling price per unit is obtained by adding a firm's desired profit per unit to the average total cost.

The greater the total expenditure, the less price sensitive customers are.

A certain item has a production cost of $24. The manufacturer takes a 25 percent markup, the wholesaler takes a 20 percent markup, and the retailer takes a 50 percent markup. Therefore, the item has a retail selling price of $80.

Business customers are sometimes less price sensitive if there are switching costs.

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 _____.

Marginal analysis focuses on the changes in average fixed cost per unit and average variable cost from selling one more unit to find the most profitable price and quantity.

All of the following observations concerning markups are true except

The price per unit is $1.00. The average variable cost per unit is 60 cents. The total fixed cost is $20,000. Compute the break-even point.

A firm's total cost increases only when its variable cost increases.

A computer store regularly advertises a very low price for a well-known brand of disks. When the customers come in, however, the salespeople point out the disadvantages of this particular brand and try to persuade them to buy other disks at much higher prices. This retailer is using:

Average-cost pricing works best in situations where demand conditions do not change a lot.

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