Question 1

Which of the following is an example of a fixed cost?

Accepted Answer

A)  Wages 
B)  Outgoing freight 
C)  Depreciation 
D)  Sales commissions 
E)  Packaging material expense 
A)  Wages 
B)  Outgoing freight 
C)  Depreciation 
D)  Sales commissions 
E)  Packaging material expense

Question 2

To maximize its profit, a producer should set a price (and produce that related output) where:

Accepted Answer

A)  marginal cost is just less than or equal to marginal revenue. 
B)  marginal cost is at its minimum. 
C)  price is as high as possible. 
D)  total revenue equals total cost. 
E)  marginal revenue is zero. 
A)  marginal cost is just less than or equal to marginal revenue. 
B)  marginal cost is at its minimum. 
C)  price is as high as possible. 
D)  total revenue equals total cost. 
E)  marginal revenue is zero.

Question 3

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others. Best Buy apparently hopes to earn a profit by

Accepted Answer

A)  achieving status quo pricing objectives. 
B)  setting prices based on "value in use." 
C)  relying on a high margin percent. 
D)  setting prices based on a cost-oriented approach. 
E)  achieving a high stockturn rate. 
A)  achieving status quo pricing objectives. 
B)  setting prices based on "value in use." 
C)  relying on a high margin percent. 
D)  setting prices based on a cost-oriented approach. 
E)  achieving a high stockturn rate.

Question 4

A high stockturn rate:

Accepted Answer

A)  is only possible with a low markup percent. 
B)  is likely to result in low profits. 
C)  reduces the inventory investment and can improve profits. 
D)  increases the space needed for inventory. 
E)  None of these alternatives is correct. 
A)  is only possible with a low markup percent. 
B)  is likely to result in low profits. 
C)  reduces the inventory investment and can improve profits. 
D)  increases the space needed for inventory. 
E)  None of these alternatives is correct.

Question 5

High Meadow Mfg. Co. sold its product through wholesalers and retailers-allowing the wholesalers a markup of 25 percent and retailers a markup of 40 percent. If the retail selling price is $100 and the manufacturer's cost is $30, what markup in dollars did High Meadow receive on the sale of this product?

Accepted Answer

A)  $5.00 
B)  $13.50 
C)  $15.00 
D)  $10.00 
E)  $20.00 
A)  $5.00 
B)  $13.50 
C)  $15.00 
D)  $10.00 
E)  $20.00

Question 6

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 7

Changes in total cost depend on variations in total variable cost, since total fixed cost stays the same.

Accepted Answer

A) True 
 B)False

Question 8

Identify 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 firm is looking to construct a new office. It puts out a request for proposals from contractors inviting their price quotations given certain defined specifications. This is an example of:

Accepted Answer

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

Question 10

_____ involves setting one price for a set of products.

Accepted Answer

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

Question 11

Each possible price has its own break-even point.

Accepted Answer

A) True 
 B)False

Question 12

"Average-cost pricing":

Accepted Answer

A)  will result in losses if actual sales are much higher than expected. 
B)  might cause a firm to charge too high or too low a price-and reduce its profits. 
C)  usually assumes the firm will sell a larger quantity than the year before. 
D)  cannot be profitable-because it ignores demand. 
E)  All of these alternatives are correct. 
A)  will result in losses if actual sales are much higher than expected. 
B)  might cause a firm to charge too high or too low a price-and reduce its profits. 
C)  usually assumes the firm will sell a larger quantity than the year before. 
D)  cannot be profitable-because it ignores demand. 
E)  All of these alternatives are correct.

Question 13

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.
Randy Todd wants to use marginal analysis to price the new tennis racquets, but doesn't know the exact shape of the firm's demand curve. Under these circumstances marginal analysis:

Accepted Answer

A)  is useless. 
B)  may be useful anyway because a profitable region usually surrounds the best price. 
C)  will suggest the same price as break-even analysis. 
D)  suggests that the only sensible approach is to follow the market leader. 
E)  none of these alternatives is correct. 
A)  is useless. 
B)  may be useful anyway because a profitable region usually surrounds the best price. 
C)  will suggest the same price as break-even analysis. 
D)  suggests that the only sensible approach is to follow the market leader. 
E)  none of these alternatives is correct.

Question 14

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 15

Value in use pricing considers what a customer will save by buying a product.

Accepted Answer

A) True 
 B)False

Question 16

Items with lower markups may be more profitable-if the stockturn is higher.

Accepted Answer

A) True 
 B)False

Question 17

A firm with a stockturn rate of 4 sells products that cost it $100,000. This requires _____ worth of inventory.

Accepted Answer

A)  $25,000 
B)  $20,000 
C)  $80,000 
D)  $400,000 
E)  $500,000 
A)  $25,000 
B)  $20,000 
C)  $80,000 
D)  $400,000 
E)  $500,000

Question 18

Marci, a student, is used to paying $1.25 for a 12-ounce can of Diet Coke from various vending machines on campus, so she expects the new vending machine just installed outside her Chemistry classroom to charge her the same amount for her favorite beverage. For Marci, the $1.25 price is a:

Accepted Answer

A)  Reference price 
B)  Gross price 
C)  Bundle price 
D)  Leader price 
E)  Bait price 
A)  Reference price 
B)  Gross price 
C)  Bundle price 
D)  Leader price 
E)  Bait price

Which of the following is an example of a fixed cost?

To maximize its profit, a producer should set a price (and produce that related output) where:

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others. Best Buy apparently hopes to earn a profit by

A high stockturn rate:

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

Changes in total cost depend on variations in total variable cost, since total fixed cost stays the same.

Identify a weakness of the average-cost approach.

A firm is looking to construct a new office. It puts out a request for proposals from contractors inviting their price quotations given certain defined specifications. This is an example of:

_____ involves setting one price for a set of products.

Each possible price has its own break-even point.

"Average-cost pricing":

The stockturn rate is

Value in use pricing considers what a customer will save by buying a product.

Items with lower markups may be more profitable-if the stockturn is higher.

A firm with a stockturn rate of 4 sells products that cost it $100,000. This requires _____ worth of inventory.

Marci, a student, is used to paying $1.25 for a 12-ounce can of Diet Coke from various vending machines on campus, so she expects the new vending machine just installed outside her Chemistry classroom to charge her the same amount for her favorite beverage. For Marci, the $1.25 price is a:

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Marketing 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, 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

Filters

Exam 17: Price Setting in the Business World

Which of the following is an example of a fixed cost?

To maximize its profit, a producer should set a price (and produce that related output) where:

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others. Best Buy apparently hopes to earn a profit by

A high stockturn rate:

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

Changes in total cost depend on variations in total variable cost, since total fixed cost stays the same.

Identify a weakness of the average-cost approach.

A firm is looking to construct a new office. It puts out a request for proposals from contractors inviting their price quotations given certain defined specifications. This is an example of:

_____ involves setting one price for a set of products.

Each possible price has its own break-even point.

"Average-cost pricing":

The stockturn rate is

Value in use pricing considers what a customer will save by buying a product.

Items with lower markups may be more profitable-if the stockturn is higher.

A firm with a stockturn rate of 4 sells products that cost it $100,000. This requires _____ worth of inventory.

Marci, a student, is used to paying $1.25 for a 12-ounce can of Diet Coke from various vending machines on campus, so she expects the new vending machine just installed outside her Chemistry classroom to charge her the same amount for her favorite beverage. For Marci, the $1.25 price is a:

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Marketing 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, 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

Filters