Deck 10: Merchandise Pricing

Question 1

_____ pricing is a policy in which the retailer sets prices for goods and services,with the intent to maintain those prices over an extended period of time.

A) Leader
B) Variable
C) Flexible
D) Customary
E) Status quo

Answer 1

D

Question 2

_____ pricing is used when differences in demand and cost force the retailer to change prices in a fairly predictable manner.

A) Unbundled
B) Uncustomary
C) Variable
D) Flexible
E) Leader

Answer 2

C

Question 3

A(n)_____ pricing policy is likely to occur when a retailer's sales staff offers the same products and quantities to different customers at different prices.

A) flexible
B) customary
C) one-price
D) leader
E) variable

Answer 3

A

Question 4

A _____ objective is a pricing objective that states a specific level of profit,such a as percentage of sales or a return on capital invested,as an objective.

A) profit maximization
B) target-return
C) percentage-of-sales
D) competition-oriented
E) skimming

Question 5

McDonald's and Burger King are sometimes forced to drop prices by promoting "value meals" in the face of mounting competition.This is an example of a ______ objective.

A) target
B) status quo
C) competitive
D) comparable
E) market share

Question 6

Which of the following is NOT a characteristic of a retailer that prices below the market?

A) Provides minimal customer services
B) Low sales volume
C) Stocks closeout merchandise
D) Stocks fast-selling merchandise
E) Occupies modest facilities in a low-rent location

Question 7

A _____ is least apt to use an above-market pricing policy.

A) small neighborhood drugstore
B) top-of-line apparel retailer, such as Neiman Marcus
C) mom-and-pop grocery store
D) warehouse club
E) fast-food restaurant located on a turnpike

Question 8

An example of a _____ pricing policy is when movie theaters give discounts to special groups,such as seniors.

A) customary
B) variable
C) leader
D) specified
E) flexible

Question 9

Which of the following conditions does NOT allow a retailer to price above the market?

A) Offering an exclusive merchandise line
B) Maintaining extended hours of operation
C) Having a competitor with similar merchandise lines located next door
D) Having outlets in accessible and convenient locations
E) Providing "extra" services

Question 10

The rules of action or guidelines that ensure uniformity of pricing decisions within a retail operation are know as the retailer's pricing:

A) tactics.
B) rules.
C) policies.
D) strategies.
E) objectives.

Question 11

As a rule,if a retailer wants to attract customers from a greater it must_____ its merchandise.

A) lower the prices of
B) double both its prices and promotion of
C) deemphasize the services it provides with
D) increase the services provided the customer and reduce the promotional activities associated with
E) reduce the promotional activities associated with

Question 12

A skimming strategy will work best for a retailer when:

A) competition is high because it "skims" right above the retailer's costs.
B) revenues are equal to expenses.
C) the retailer has a temporary monopoly with its product line.
D) the retailer has excess capacity in its building.
E) demand is less than supply.

Question 13

All of the following are typical pricing objectives EXCEPT:

A) target-return.
B) sales maximization
C) status quo.
D) profit maximization
E) sales-oriented.

Question 14

An example of a retailer using customary pricing would be:

A) a local barber shop maintaining the price of a haircut at $9.00.
B) a local hardware store promising to undersell the competition by at least 1 percent.
C) Wal-Mart promising to always have the lowest prices in town.
D) setting a price at $4.99 instead of $5.00.
E) charging different consumers different prices.

Question 15

_____ is a pricing objective that seeks to obtain as much profit as possible.

A) Profit maximization
B) Target-return
C) Percentage-of-sales
D) Competition-oriented
E) Skimming

Question 16

You have decided that one of the goals of your retail expansion is to establish a loyal customer base before the competition is able to do so.Therefore,when you enter a new trading area with a new product or service,you should use a _____ price strategy.

A) late markdown
B) penetration
C) status quo
D) skimming
E) cost-plus

Question 17

Flowers tend to be priced higher when demand is greatest,around Mother's Day and Valentine's Day.This is an example of _____ pricing.

A) flexible
B) dynamic
C) psychological
D) variable
E) customary

Question 18

A _____ is a range of prices for a specific merchandise line that appeals to customers in a certain demographic group.

A) price zone
B) odd price
C) price line
D) price point
E) price range

Question 19

A(n)_____ pricing policy is a policy that regularly discounts merchandise from the established market price in order to build store traffic,generate high sales,and enhance gross margin dollars per square foot of selling space.

A) above-market
B) flexible
C) odd-pricing
D) below-market
E) loss leader

Question 20

The relationship between a retailer's pricing decisions and the other (i.e.merchandise selection,promotion,location)decision areas can best be described as:

A) independent.
B) competitive.
C) separate.
D) counter-related.
E) interactive.

Question 21

For leader pricing to be effective,which of the following guidelines should be followed?

A) Not many customers should actually want to buy the leader item.
B) The leader item must have had a very high markup before being discounted.
C) The leader item must have narrow appeal within the retailer's target market.
D) The leader item must be an item frequently purchased by the consumer.
E) It should never be sold below cost.

Question 22

If a salesperson persuades a customer to purchase a higher-priced item than the customer initially intended,the salesperson has _____ the customer.

A) flexed
B) tricked
C) traded up
D) baited
E) deceived

Question 23

After being introduced to a higher-priced washing machine,the customer expresses a desire to purchase a lower-priced item.When this happens,the customer is said to have:

A) bailed.
B) traded up.
C) yielded.
D) traded down.
E) extended.

Question 24

If an item costs a retailer $75 and the retailer's markup percentage is 30 percent based on cost,what is the retailer's selling price?

A) $22.50
B) $97.50
C) $208.33
D) $283.33
E) Cannot be determined with the information provided.

Question 25

In _____ pricing,a high-demand item is priced low and advertised heavily in an effort to attract consumers into a store.

A) bait
B) multiple-unit
C) variable
D) leader
E) odd

Question 26

_____ is a practice where a low-priced model of a shopping good is used to lure shoppers into a store where the salesperson will attempt to persuade them to purchase a higher-priced model.

A) Leader pricing
B) High-low pricing
C) Multiple-unit pricing
D) Price lining
E) Bait-and-switch pricing

Question 27

A _____ pricing strategy involves the use of high everyday prices and low leader "specials" on featured items in a retailer's weekly ads.

A) flexible
B) leader
C) competitive
D) variable
E) high-low

Question 28

A retailer wants to increase the number of customers coming into its store.Which of the following pricing strategies has the greatest potential for success?

A) Promotional pricing
B) Bundle pricing
C) Price flexibility
D) Odd pricing
E) Leader pricing

Question 29

When a retailer increases the number of customers coming into its store by advertising a widely known and frequently purchased product below cost,it is following a _____ strategy.

A) promotional pricing
B) unit pricing
C) loss-leader pricing
D) leader pricing
E) below-market pricing

Question 30

If the percentage markup on cost is 50 percent,what is the percentage markup on selling price?

A) 140 percent
B) 100 percent
C) 28.5 percent
D) 33.3 percent
E) 50 percent

Question 31

An example of odd pricing would be:

A) a low introductory price followed by a sharp price increase.
B) "buy one, get one free".
C) having the selling price end in any odd number.
D) subtracting a trade-in from the selling price.
E) selling a product for $39.98 instead of $40.00.

Question 32

A landlord charges the same apartment rent as last year,but now adds a fee for parking spaces.This practice is known as:

A) entrapment.
B) unbundling.
C) bait-and-switch pricing.
D) bundling.
E) high-low pricing.

Question 33

'_____ occurs when distinct multiple items,generally from different merchandise lines,are offered at a special sale price.

A) Bundling
B) Multi-unit pricing
C) Odd pricing
D) Leader pricing
E) Price lining

Question 34

If a retailer can sell an item for $6 and needs a 40 percent markup on retail to meet profit objectives,that retailer should pay no more than _____ for the item.

A) $2.40
B) $3.60
C) $6.40
D) $8.40
E) $9.60

Question 35

Your local bike shop offers a wide variety of bicycles at the following price levels: $99.99,$160.99,$320.95,$619.99,and $1039.99.The bike shop is using a _____ pricing strategy.

A) variable
B) price lining
C) standard price mix
D) stream lining
E) flexible

Question 36

Pricing a product at $49.98 instead of $50.00 is called:

A) trading down.
B) price pointing.
C) odd pricing.
D) price lining.
E) even pricing.

Question 37

_____ pricing occurs when the price of each unit as a multi-unit package is less than the price of each unit if it were sold individually.

A) Bundle
B) One-price
C) Leader
D) Loss leader
E) Multiple-unit

Question 38

Percentage markup on selling price equals:

A) markup/cost.
B) initial markup - maintained markup.
C) percentage markup on selling price/(100 percent - percentage markup on selling price).
D) (percentage markup on cost)/(100 percent + percentage markup on cost).
E) 100 percent - percentage markup on cost.

Question 39

If a retailer buys a product for $30 and sells it for $50,what is the markup percentage,if the markup is based on cost?

A) 33 percent
B) 40 percent
C) 67 percent
D) 80 percent
E) 100 percent

Question 40

What type of pricing policy increases both the efficiency and fairness in handling customer transactions especially where the selling activity is delegated to salespersons who have varying degrees of loyalty to the retailer?

A) Variable
B) Flexible
C) Price lining
D) One-price
E) Multiple-unit

Question 41

Mike's Appliances bought a refrigerator for $480.The initial price on the refrigerator was $950,but it was ultimately sold for $825.What were initial and maintained markups,respectively?

A) 36.3 percent; 57.0 percent
B) 46.3 percent; 58.2 percent
C) 49.5 percent; 41.8 percent
D) 50.5 percent; 58.2 percent
E) 63.7 percent; 43.0 percent

Question 42

A DVD player that was originally priced at $399.95 and cost $215 is ultimately sold for $349.95.What were the reduction percentage and the maintained markup percentage on this DVD player?

A) 14.3 percent; 38.6 percent
B) 12.5 percent; 38.6 percent
C) 38.6 percent; 12.5 percent
D) 15.1 percent; 38.6 percent
E) 46.2 percent; 12.5 percent

Question 43

Customer service standards vary throughout the world.

Question 44

As a rule,a retailer's pricing and promotion decisions should be made independently of each other.

Question 45

A portable CD player was originally priced at $79.95 and cost $39 is ultimately sold for $64.95.What was the reduction percentage on the portable CD player?

A) 19 percent
B) 23 percent
C) 38 percent
D) 49 percent
E) 58 percent

Question 46

Given the following information,what initial markup percentage should be planned if net sales are expected to be $500,000?
$\begin{array} { ll } \text { Operating expenses}&\$120,000\\ \text { Net profit goal}&\$30,000\\ \text {Planned reductions for markdowns }&\$320,000\\ \text { Planned reductions for theft/shortage/discount}&\$8,000\\ \text { Alteration costs}&\$10,000\\ \text {Cash discounts received by the retailer }&\$5,000\\\end{array}$

A) 28 percent
B) 36 percent
C) 30 percent
D) 39 percent
E) 45 percent

Question 47

The retailer's controllable element of price can be either the cost of goods sold or the gross margin that is added to the cost.

Question 48

Given the following information,what is the initial markup percentage? Planned sales = $180,000; planned expenses = $48,000; planned profit = $12,000 and planned reductions = $4,000.

A) 33 percent
B) 39 percent
C) 35 percent
D) 37 percent
E) 40 percent

Question 49

Which of the following is NOT an item that must be considered when planning an initial markup?

A) Customer returns and allowances
B) Stock shortages
C) Planned gross margin
D) Cash discounts to customers
E) Employee discounts

Question 50

One of the cues a customer uses in determining a retailer's image is the retailer's prices.

Question 51

Which of the following situations is NOT a good reason for using a high markup percentage?

A) The products have a high risk of a price reduction due to the seasonality of the goods
B) The products have low fixed costs associated with their sale
C) The products have a low elasticity of demand
D) The products have high handling and storage costs
E) The products are only sold through few retail outlets

Question 52

Maintained markup percentage equals:

A) initial markup percentage - [(reduction percentage)(100 percent - initial markup percentage)].
B) (original retail price - cost)/original retail price.
C) initial markup percentage + [(reduction percentage)(100 percent - initial markup percentage].
D) (gross margin + alteration costs + reductions) / (net sales + reductions).
E) (percentage markup on selling price) / (100 percent - percentage markup on selling price).

Question 53

The retailer who never makes a buying error is probably:

A) missing profit opportunities by being too conservative.
B) overestimating demand.
C) overpromoting.
D) maximizing profits.
E) controlling expenses.

Question 54

A retailer must consider the impact of a customer's travel costs when determining what price a customer will pay for merchandise.

Question 55

Reductions in the price of an item that are taken in order to stimulate sales are termed:

A) maintained price cuts.
B) promotional price cuts.
C) shortages.
D) markdowns.
E) initial price cuts.

Question 56

An advantage of a(n)_____ markdown policy is that it allows the retailer to replenish lower-priced lines from the higher priced lines that have been marked down.

A) low
B) early
C) segmented
D) late
E) flexible

Question 57

Pricing is an interactive decision made in conjunction with the firm's mission statement,its goals and objectives,its strategy,its operational management,and administrational management.

Question 58

A(n)_____ policy should be adopted when the retailer wants to avoid disrupting the sale of regular merchandise by marking down goods too frequently.

A) early
B) late
C) negative
D) flexible
E) steady

Question 59

Markdown percentage is calculated by:

A) dividing the amount of the reduction by the original selling price.
B) dividing the amount of the reduction by the original cost.
C) dividing the amount of the reduction by the price after the markdown.
D) dividing the amount of the reduction by difference between the cost and the original selling price.
E) dividing the amount of the reduction by the net sales.

Question 60

As a rule,retailers that offer greater levels of customer service tend to have lower prices.

Question 61

Bundling generally involves selling distinct multiple items offered together at a "special price."

Question 62

Sales-oriented objectives are based on achieving a certain level of sales,market share,or profit.

Question 63

A small neighborhood drugstore is probably forced to use above-the-market pricing because of their low cost structure and high sales volume.

Question 64

Movies and vending machine products are common examples of items that use customary pricing.

Question 65

Because odd prices are associated with low prices,they are typically used by retailers who sell at prices below the market or at the market.

Question 66

The easy access location of gift shops in hotels and airline terminals allows retailers in these locations to charge higher prices.

Question 67

The practice of advertising a low-priced model of a shopping good which the retailer has no intention of selling,in order to lure shoppers into a store is called "trading up."

Question 68

Some consumers will pay higher-than-average prices for specialty items.

Question 69

A price zone is a range of prices for a particular merchandise line that appeals to customers in a certain market segment.

Question 70

The practice of setting retail prices that end in the digits 5,8 or 9 is called odd pricing.

Question 71

A retail store's pricing policies should reflect the expectations of its target market.

Question 72

Retailers who are happy with their current market share and level of profits will generally prefer a status quo pricing objective.

Question 73

Pricing policies are rules of action,or guidelines,that ensure uniformity of pricing decisions within a retail operation.

Question 74

Most jewelry stores and automobile dealerships use the flexible pricing policy.

Question 75

Profitability is not directly related to the amount of gross margin per unit sold times the number of units sold.

Question 76

A major advantage of the penetration objective is that it helps to establish a loyal customer base.

Question 77

A one-price policy speeds the amount of time needed to complete a customer transaction.

Question 78

A local retailer offers T-shirts at three price levels.Consumers can pay $6.99,$14.99,or $27.99 for the shirts.This pricing strategy is called price lining.

Question 79

Retailers use multiple-unit pricing to encourage additional sales and to increase profits.

Question 80

Most types of retail establishments are able to attract all segments of a target market.