Question 1

A company has total fixed cost of $120,000. Its variable cost per unit is $2.00 and its price per unit is $3.50. The break-even point in units is:

Accepted Answer

A)  60,000. 
B)  80,000. 
C)  34,286. 
D)  21,818. 
E)  Cannot be determined from the information provided. 
A)  60,000. 
B)  80,000. 
C)  34,286. 
D)  21,818. 
E)  Cannot be determined from the information provided.

Question 2

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 3

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 4

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.
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 5

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

Accepted Answer

A) True 
 B)False

Question 6

A "markup chain" can be used to calculate the price structure in a whole channel.

Accepted Answer

A) True 
 B)False

Question 7

At zero output, total variable cost is

Accepted Answer

A)  higher than total fixed cost. 
B)  equal to total fixed cost. 
C)  unity. 
D)  zero. 
E)  substantial. 
A)  higher than total fixed cost. 
B)  equal to total fixed cost. 
C)  unity. 
D)  zero. 
E)  substantial.

Question 8

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 9

The break-even point is the intersection of the total cost curve and the total profit curve.

Accepted Answer

A) True 
 B)False

Question 10

Customers are likely to be less price sensitive

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 these alternatives is correct. 
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 these alternatives is correct.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

At zero output, total variable cost is zero.

Accepted Answer

A) True 
 B)False

Question 13

When CenturyLink attracts residential customers by setting one monthly fee for high-speed Internet, cable TV, and long-distance phone services that is $40 less than the price of purchasing these three services separately, this is an example of:

Accepted Answer

A)  Reference price 
B)  Price line 
C)  Bundle price 
D)  Leader price 
E)  Demand-backward price 
A)  Reference price 
B)  Price line 
C)  Bundle price 
D)  Leader price 
E)  Demand-backward price

Question 14

With regard to bid pricing, a marketing manager should be aware that:

Accepted Answer

A)  the same overhead charges and profit rates usually apply to all bids. 
B)  bids are usually based on inspection. 
C)  a big problem is estimating all the costs--including the variable and fixed costs that apply to a particular job. 
D)  e-commerce is of little use in bid pricing. 
E)  None of these alternatives is correct. 
A)  the same overhead charges and profit rates usually apply to all bids. 
B)  bids are usually based on inspection. 
C)  a big problem is estimating all the costs--including the variable and fixed costs that apply to a particular job. 
D)  e-commerce is of little use in bid pricing. 
E)  None of these alternatives is correct.

Question 15

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 16

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 17

_____ 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 18

An intermediary seeking high profits should:

Accepted Answer

A)  use the lowest markup that will still cover selling expenses. 
B)  use price lining. 
C)  use high markups. 
D)  choose the markup which maximizes turnover. 
E)  try to find the markup level related to the most profitable price. 
A)  use the lowest markup that will still cover selling expenses. 
B)  use price lining. 
C)  use high markups. 
D)  choose the markup which maximizes turnover. 
E)  try to find the markup level related to the most profitable price.

A company has total fixed cost of $120,000. Its variable cost per unit is $2.00 and its price per unit is $3.50. The break-even point in units is:

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

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

A "markup chain" can be used to calculate the price structure in a whole channel.

At zero output, total variable cost is

Break-even analysis

The break-even point is the intersection of the total cost curve and the total profit curve.

Customers are likely to be less price sensitive

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

At zero output, total variable cost is zero.

When CenturyLink attracts residential customers by setting one monthly fee for high-speed Internet, cable TV, and long-distance phone services that is $40 less than the price of purchasing these three services separately, this is an example of:

With regard to bid pricing, a marketing manager should be aware that:

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

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

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

An intermediary seeking high profits should:

Marketing39s 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

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 Challenges

Economics Fundamentals

Marketing Arithmetic

Filters

Exam 17: Price Setting in the Business World

A company has total fixed cost of $120,000. Its variable cost per unit is $2.00 and its price per unit is $3.50. The break-even point in units is:

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

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

A "markup chain" can be used to calculate the price structure in a whole channel.

At zero output, total variable cost is

Break-even analysis

The break-even point is the intersection of the total cost curve and the total profit curve.

Customers are likely to be less price sensitive

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

At zero output, total variable cost is zero.

When CenturyLink attracts residential customers by setting one monthly fee for high-speed Internet, cable TV, and long-distance phone services that is $40 less than the price of purchasing these three services separately, this is an example of:

With regard to bid pricing, a marketing manager should be aware that:

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

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

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

An intermediary seeking high profits should:

Marketing39s 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

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 Challenges

Economics Fundamentals

Marketing Arithmetic

Filters