Question 1

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 alternatives 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 alternatives is correct.

Question 2

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

Accepted Answer

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

Question 3

A major advantage of average-cost pricing is that it assumes costs remain constant at different levels of output.

Accepted Answer

A) True 
 B)False

Question 4

A company has total fixed cost of $400,000. Its fixed-cost contribution per unit is $10.00, and its price per unit is $5.00. What is the break-even point in sales dollars?

Accepted Answer

A)  $200,000 
B)  $2,000,000 
C)  $4,000,000 
D)  $800,000 
E)  Cannot be determined from the information provided 
A)  $200,000 
B)  $2,000,000 
C)  $4,000,000 
D)  $800,000 
E)  Cannot be determined from the information provided

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent.

Accepted Answer

A) True 
 B)False

Question 7

Gross margin is expressed as

Accepted Answer

A)  gross sales minus accounts receivable. 
B)  net sales minus contribution margin. 
C)  net margin minus sales and operating expenses. 
D)  net sales minus administrative expenses. 
E)  net sales minus cost of goods sold. 
A)  gross sales minus accounts receivable. 
B)  net sales minus contribution margin. 
C)  net margin minus sales and operating expenses. 
D)  net sales minus administrative expenses. 
E)  net sales minus cost of goods sold.

Question 8

The sum of those changing expenses which are closely related to output is called:

Accepted Answer

A)  total fixed cost. 
B)  total cost. 
C)  total overhead cost. 
D)  total variable cost. 
E)  None of these is a good answer. 
A)  total fixed cost. 
B)  total cost. 
C)  total overhead cost. 
D)  total variable cost. 
E)  None of these is a good answer.

Question 9

If a service firm sets a specific price for each possible job-rather than setting a standard price for all potential customers-it is most likely using:

Accepted Answer

A)  product-bundle pricing. 
B)  a one-price policy. 
C)  price lining. 
D)  average-cost pricing. 
E)  bid pricing. 
A)  product-bundle pricing. 
B)  a one-price policy. 
C)  price lining. 
D)  average-cost pricing. 
E)  bid pricing.

Question 10

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

Accepted Answer

A) True 
 B)False

Question 11

A firm in monopolistic competition with a down-sloping demand curve:

Accepted Answer

A)  does not have to worry about price competition due to the nature of its demand curve. 
B)  can use marginal analysis to help it maximize profits. 
C)  will have to charge the "market price" which is set by the intersection of industry supply and demand. 
D)  could use marginal analysis to compare alternatives-but this would not help in pricing because this method focuses on selling one more unit and therefore ignores total profitability. 
E)  None of these alternatives is correct. 
A)  does not have to worry about price competition due to the nature of its demand curve. 
B)  can use marginal analysis to help it maximize profits. 
C)  will have to charge the "market price" which is set by the intersection of industry supply and demand. 
D)  could use marginal analysis to compare alternatives-but this would not help in pricing because this method focuses on selling one more unit and therefore ignores total profitability. 
E)  None of these alternatives is correct.

Question 12

"Psychological pricing" involves setting prices which end in certain numbers, while "odd-even pricing" is setting prices which have special appeal to target customers.

Accepted Answer

A) True 
 B)False

Question 13

Given the following data, determine the break-even point in units: Total fixed cost = $120,000
Variable cost per unit = $0.60
Selling price per unit = $1.10

Accepted Answer

A)  100,000 
B)  240,000 
C)  200,000 
D)  218,182 
E)  50,000 
A)  100,000 
B)  240,000 
C)  200,000 
D)  218,182 
E)  50,000

Question 14

Break-even analysis

Accepted Answer

A)  assumes that the demand curve is perfectly horizontal at the selling price. 
B)  reveals the price that will earn the highest profit. 
C)  cannot be used for comparing several different alternatives (for example, assuming different prices). 
D)  considers the effect of price on the quantity that consumers will want. 
E)  None of these alternatives is correct. 
A)  assumes that the demand curve is perfectly horizontal at the selling price. 
B)  reveals the price that will earn the highest profit. 
C)  cannot be used for comparing several different alternatives (for example, assuming different prices). 
D)  considers the effect of price on the quantity that consumers will want. 
E)  None of these alternatives is correct.

Question 15

A firm's average fixed cost increases as its output increases.

Accepted Answer

A) True 
 B)False

Question 16

_____ is setting a few price levels for a product line and then marking all items at these prices.

Accepted Answer

A)  Price following 
B)  Bait pricing 
C)  Odd-even pricing 
D)  Price lining 
E)  Price leading 
A)  Price following 
B)  Bait pricing 
C)  Odd-even pricing 
D)  Price lining 
E)  Price leading

Question 17

The production cost of an automobile component is $45. The producer takes a 10 percent markup and sells the product to the wholesaler. What is the wholesaler's cost?

Accepted Answer

A)  $45 
B)  $5 
C)  $10 
D)  $50 
E)  $60 
A)  $45 
B)  $5 
C)  $10 
D)  $50 
E)  $60

Question 18

Value in use pricing

Accepted Answer

A)  does not vary from one product to another. 
B)  sets a price that will capture some of what customers will save by substituting the firm's product for the one currently being used. 
C)  merely sets the price at what customers expect to pay. 
D)  sets a rather high price to suggest high quality or high status. 
E)  is determined by online auctions. 
A)  does not vary from one product to another. 
B)  sets a price that will capture some of what customers will save by substituting the firm's product for the one currently being used. 
C)  merely sets the price at what customers expect to pay. 
D)  sets a rather high price to suggest high quality or high status. 
E)  is determined by online auctions.

Question 19

A major problem with average-cost pricing is that it does not allow for cost variations at different levels of output.

Accepted Answer

A) True 
 B)False

Question 20

The main advantage that marginal analysis has over most other popular pricing methods is that it:

Accepted Answer

A)  Considers both fixed and variable costs. 
B)  Takes into account the break-even point. 
C)  Allows managers to evaluate pricing alternatives. 
D)  Takes into account both costs and demand. 
E)  Incorporates the markup chain. 
A)  Considers both fixed and variable costs. 
B)  Takes into account the break-even point. 
C)  Allows managers to evaluate pricing alternatives. 
D)  Takes into account both costs and demand. 
E)  Incorporates the markup chain.

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

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

A major advantage of average-cost pricing is that it assumes costs remain constant at different levels of output.

A company has total fixed cost of $400,000. Its fixed-cost contribution per unit is $10.00, and its price per unit is $5.00. What is the break-even point in sales dollars?

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

By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent.

Gross margin is expressed as

The sum of those changing expenses which are closely related to output is called:

If a service firm sets a specific price for each possible job-rather than setting a standard price for all potential customers-it is most likely using:

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

A firm in monopolistic competition with a down-sloping demand curve:

"Psychological pricing" involves setting prices which end in certain numbers, while "odd-even pricing" is setting prices which have special appeal to target customers.

Given the following data, determine the break-even point in units: Total fixed cost = $120,000 Variable cost per unit = $0.60 Selling price per unit = $1.10

Break-even analysis

A firm's average fixed cost increases as its output increases.

_____ is setting a few price levels for a product line and then marking all items at these prices.

The production cost of an automobile component is $45. The producer takes a 10 percent markup and sells the product to the wholesaler. What is the wholesaler's cost?

Value in use pricing

A major problem with average-cost pricing is that it does not allow for cost variations at different levels of output.

The main advantage that marginal analysis has over most other popular pricing methods is that it:

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

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

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

A major advantage of average-cost pricing is that it assumes costs remain constant at different levels of output.

A company has total fixed cost of $400,000. Its fixed-cost contribution per unit is $10.00, and its price per unit is $5.00. What is the break-even point in sales dollars?

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

By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent.

Gross margin is expressed as

The sum of those changing expenses which are closely related to output is called:

If a service firm sets a specific price for each possible job-rather than setting a standard price for all potential customers-it is most likely using:

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

A firm in monopolistic competition with a down-sloping demand curve:

"Psychological pricing" involves setting prices which end in certain numbers, while "odd-even pricing" is setting prices which have special appeal to target customers.

Given the following data, determine the break-even point in units: Total fixed cost = $120,000 Variable cost per unit = $0.60 Selling price per unit = $1.10

Break-even analysis

A firm's average fixed cost increases as its output increases.

_____ is setting a few price levels for a product line and then marking all items at these prices.

The production cost of an automobile component is $45. The producer takes a 10 percent markup and sells the product to the wholesaler. What is the wholesaler's cost?

Value in use pricing

A major problem with average-cost pricing is that it does not allow for cost variations at different levels of output.

The main advantage that marginal analysis has over most other popular pricing methods is that it:

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