Question 1

When Walgreens Drugstore advertises one price for the cost of a roll of film and the cost of processing it, it is using

Accepted Answer

A)  complementary product pricing. 
B)  flexible pricing. 
C)  product-bundle pricing. 
D)  a one-price policy. 
E)  bait pricing. 
A)  complementary product pricing. 
B)  flexible pricing. 
C)  product-bundle pricing. 
D)  a one-price policy. 
E)  bait pricing.

Question 2

Customers are likely to be less price sensitive when:

Accepted Answer

A)  the greater the total expenditure. 
B)  the greater their share of the cost. 
C)  the greater the significance of the end benefit. 
D)  the easier it is to compare prices. 
E)  None of the above. 
A)  the greater the total expenditure. 
B)  the greater their share of the cost. 
C)  the greater the significance of the end benefit. 
D)  the easier it is to compare prices. 
E)  None of the above.

Question 3

According to the rule for maximizing profit, the highest profit is earned at the price where

Accepted Answer

A)  average cost is just less than or equal to marginal revenue. 
B)  average cost is just less than or equal to average revenue. 
C)  total revenue is just greater than total costs. 
D)  marginal cost is just less than or equal to marginal revenue. 
E)  total revenue is equal to total costs. 
A)  average cost is just less than or equal to marginal revenue. 
B)  average cost is just less than or equal to average revenue. 
C)  total revenue is just greater than total costs. 
D)  marginal cost is just less than or equal to marginal revenue. 
E)  total revenue is equal to total costs.

Question 4

Michael Soles--owner of Soles Shoe Store--recently discovered that shoe stores in his trading area have an average markup of 40 percent. Upon investigation, Michael found that his average markup is $15 on shoes that he sells for $45. This suggests that:

Accepted Answer

A)  Michael has higher-than-average costs. 
B)  Michael is pricing his products higher than his competitors. 
C)  Michael is taking a smaller average markup than his competitors. 
D)  Michael has a relatively high stockturn rate. 
E)  Michael's markups in dollar amounts are about the same as his competitors. 
A)  Michael has higher-than-average costs. 
B)  Michael is pricing his products higher than his competitors. 
C)  Michael is taking a smaller average markup than his competitors. 
D)  Michael has a relatively high stockturn rate. 
E)  Michael's markups in dollar amounts are about the same as his competitors.

Question 5

The stockturn rate is

Accepted Answer

A)  the firm's ability to meet its short-term financial obligations. 
B)  the number of days that credit sales remains in receivables. 
C)  the number of times the average inventory is sold in a year. 
D)  the difference between net sales and cost of goods sold. 
E)  the ratio of sales to inventory. 
A)  the firm's ability to meet its short-term financial obligations. 
B)  the number of days that credit sales remains in receivables. 
C)  the number of times the average inventory is sold in a year. 
D)  the difference between net sales and cost of goods sold. 
E)  the ratio of sales to inventory.

Question 6

If Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95, it is probably practicing odd-even pricing.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  $4.75 
B)  $4.87 
C)  $5.03 
D)  $5.33 
E)  $5.45 
A)  $4.75 
B)  $4.87 
C)  $5.03 
D)  $5.33 
E)  $5.45

Question 8

_____ means offering a specific price for each possible job rather than setting a price that applies for all customers.

Accepted Answer

A)  Price lining 
B)  Odd-even pricing 
C)  Product bundle pricing 
D)  Bid pricing 
E)  Price leading 
A)  Price lining 
B)  Odd-even pricing 
C)  Product bundle pricing 
D)  Bid pricing 
E)  Price leading

Question 9

Total fixed cost:

Accepted Answer

A)  is the sum of all expenses which are closely related to output. 
B)  is the sum of those costs which do not change in total no matter how much is produced. 
C)  may vary in the short run--but is more or less fixed in the long run. 
D)  is the sum of all costs of manufacturing and distributing a product. 
E)  would be zero if the quantity produced were zero. 
A)  is the sum of all expenses which are closely related to output. 
B)  is the sum of those costs which do not change in total no matter how much is produced. 
C)  may vary in the short run--but is more or less fixed in the long run. 
D)  is the sum of all costs of manufacturing and distributing a product. 
E)  would be zero if the quantity produced were zero.

Question 10

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, 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.
-By pricing below other retailers, Sports Depot apparently:

Accepted Answer

A)  hopes to achieve status quo pricing objectives. 
B)  wants to set prices based on "value in use." 
C)  relies on a high margin percent. 
D)  sees this as an oligopoly market. 
E)  expects a high stockturn rate. 
A)  hopes to achieve status quo pricing objectives. 
B)  wants to set prices based on "value in use." 
C)  relies on a high margin percent. 
D)  sees this as an oligopoly market. 
E)  expects a high stockturn rate.

Question 11

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 the above is true. 
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 the above is true.

Question 12

According to the text, markup (percent) means percentage of cost unless otherwise stated.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Break-even analysis can be useful for:

Accepted Answer

A)  estimating future sales. 
B)  setting the most profitable price. 
C)  comparing pricing alternatives. 
D)  relating assumed prices to demand estimates. 
E)  All of the above. 
A)  estimating future sales. 
B)  setting the most profitable price. 
C)  comparing pricing alternatives. 
D)  relating assumed prices to demand estimates. 
E)  All of the above.

Question 15

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, 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 final selling price Sports Depot charges for a SPI basketball?

Accepted Answer

A)  $10.00 
B)  $12.00 
C)  $12.50 
D)  $15.00 
E)  $18.00 
A)  $10.00 
B)  $12.00 
C)  $12.50 
D)  $15.00 
E)  $18.00

Question 16

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, 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 uses average-cost pricing, a big problem will be:

Accepted Answer

A)  it ignores the demand curve for its products. 
B)  fixed costs are too hard to estimate. 
C)  the effects of variable costs are ignored. 
D)  the desired profit cannot be included. 
A)  it ignores the demand curve for its products. 
B)  fixed costs are too hard to estimate. 
C)  the effects of variable costs are ignored. 
D)  the desired profit cannot be included.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

Price lining tends to result in faster turnover, fewer markdowns, quicker sales, and simplified buying.

Accepted Answer

A) True 
 B)False

Question 20

Ignoring demand is the major weakness of average-cost pricing

Accepted Answer

A) True 
 B)False

When Walgreens Drugstore advertises one price for the cost of a roll of film and the cost of processing it, it is using

Customers are likely to be less price sensitive when:

According to the rule for maximizing profit, the highest profit is earned at the price where

Michael Soles--owner of Soles Shoe Store--recently discovered that shoe stores in his trading area have an average markup of 40 percent. Upon investigation, Michael found that his average markup is $15 on shoes that he sells for $45. This suggests that:

The stockturn rate is

If Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95, it is probably practicing odd-even pricing.

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

_____ means offering a specific price for each possible job rather than setting a price that applies for all customers.

Total fixed cost:

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

According to the text, markup (percent) means percentage of cost unless otherwise stated.

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

Break-even analysis can be useful for:

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

Gross margin is expressed as

Price lining tends to result in faster turnover, fewer markdowns, quicker sales, and simplified buying.

Ignoring demand is the major weakness of average-cost pricing

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Marketing Environment

Focusing Marketing Strategy With Segmentation and Positioning

Demographic Dimensions of Global Consumer Markets

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

Implementing and Controlling Marketing Plans: Evolution and Revolution

Managing Marketings Link With Other Functional Areas

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

Economics Fundamentals

Marketing Arithmetic

Filters

Exam 18: Price Setting in the Business World

When Walgreens Drugstore advertises one price for the cost of a roll of film and the cost of processing it, it is using

Customers are likely to be less price sensitive when:

According to the rule for maximizing profit, the highest profit is earned at the price where

Michael Soles--owner of Soles Shoe Store--recently discovered that shoe stores in his trading area have an average markup of 40 percent. Upon investigation, Michael found that his average markup is $15 on shoes that he sells for $45. This suggests that:

The stockturn rate is

If Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95, it is probably practicing odd-even pricing.

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

_____ means offering a specific price for each possible job rather than setting a price that applies for all customers.

Total fixed cost:

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

According to the text, markup (percent) means percentage of cost unless otherwise stated.

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

Break-even analysis can be useful for:

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

Gross margin is expressed as

Price lining tends to result in faster turnover, fewer markdowns, quicker sales, and simplified buying.

Ignoring demand is the major weakness of average-cost pricing

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Marketing Environment

Focusing Marketing Strategy With Segmentation and Positioning

Demographic Dimensions of Global Consumer Markets

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

Implementing and Controlling Marketing Plans: Evolution and Revolution

Managing Marketings Link With Other Functional Areas

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

Economics Fundamentals

Marketing Arithmetic

Filters