Deck 11: Pricing and Credit Strategies

Question 1

________ is a technique which greatly simplifies the pricing function by setting the same price for items with similar characteristics.

A)Odd pricing
B)Leader pricing
C)Price lining
D)Geographical pricing

Answer 1

C

Question 2

When using a skimming price strategy,small business owners should remember that:

A)it is difficult to correct pricing mistakes with this strategy.
B)is a long-term policy and it will take time to see appropriate results.
C)if a price is set too low initially,it can be very hard to raise it later.
D)it is an excellent strategy for discouraging competitors from entering the market.

Answer 2

D

Question 3

Small business owners get into trouble when determining their price floor when they:

A)focus on what the customer will pay.
B)assume their costs are the same as their competitors'.
C)begin to track financial ratios to determine what they are doing.
D)use the price floor as the minimum price in their acceptable price range.

Answer 3

B

Question 4

The _______ pricing strategy often reinforces the unique,prestigious image of a company.

A)penetration
B)introductory
C)discount
D)skimming

Question 5

A new product ________ pricing strategy is often used in markets with little competition and when the company seeks to recover start-up costs quickly.

A)penetration
B)skimming
C)discount
D)sliding-down-the-demand-curve

Question 6

The basic objective of a penetration pricing policy is to:

A)recover start-up costs as quickly as possible.
B)transform the small firm into a discount outlet.
C)gain quick access into a market to realize high sales volume quickly.
D)discourage competition and gradually become a high volume producer.

Question 7

Jerry is developing a pricing strategy for an established line of home care products.His premium products are priced over $50,his best products are in the $2540 range,and his good products are $1015 range.Jerry is using a ________ strategy.

A)penetration pricing
B)leader pricing
C)price lining
D)geographic pricing

Question 8

When small manufacturing companies face rapidly increasing raw material costs,they can adopt a number of strategies including:

A)pass the increasing costs along to their customers without comment.
B)absorb costs for the short term and plan for double price increases in the next pricing cycle.
C)reconsider their competitive strategy and seek a niche they can service.
D)emphasize the value their company provides customers.

Question 9

________ pricing policy is used to introduce a relatively low-priced good into a market where no "elite segment" exists.

A)Penetration
B)Skimming
C)Discount
D)Sliding-down-the-demand-curve

Question 10

Tom is working on a pricing strategy for his company's new product line.In order to determine the price ceiling for these products,Tom needs to know:

A)what price range will work best.
B)what his company's cost structures are.
C)what his customers are willing to pay.
D)what his competitors are charging.

Question 11

The Omega Company introduces products with a higher-than-normal price in an effort to quickly recover the initial developmental and promotional costs of the product.The Omega Company is pursuing a ________ pricing strategy.

A)fixed-price
B)skimming
C)penetration
D)loss leader

Question 12

In ________ pricing,a type of geographical pricing,a small firm charges customers located in different territories different prices for the same products.

A)FOB factory
B)uniform delivered
C)zone
D)price lining

Question 13

A ________ strategy works well when a company has a mature product,loyal customers,a reputation for quality,and few competitors.

A)penetration
B)skimming
C)discount
D)price lining

Question 14

The final price set by the entrepreneur for the products depends on:

A)the desired image for the products.
B)the cost structure.
C)what customer will pay.
D)what competitors are charging.

Question 15

When a retailer routinely prices goods at $9.97 and $7.36 rather than $10.00 and $7.50,the retailer is using:

A)variable pricing.
B)penetration pricing.
C)odd pricing.
D)price skimming.

Question 16

________ is a technique in which a small firm marks down the price of a popular item below its normal price in an effort to increase customer traffic and to boost sales of other items.

A)Odd pricing
B)Leader pricing
C)Price lining
D)Suggested retail pricing

Question 17

When pricing products,it is important to remember that:

A)there is an ideal price that customers will pay for a given product or service.
B)once the acceptable price range is found,prices should not be changed again.
C)pricing is more an intuitive than a quantitative process.
D)a customer orientation in price setting is most important.

Question 18

Geographical pricing includes numerous techniques,such as:

A)uniform delivered pricing.
B)loss-leader pricing.
C)markdowns.
D)multiple pricing.

Question 19

________ pricing strategy introduces a new product at a low price to gain quick acceptance and extensive distribution in a mass market.

A)Penetration
B)Skimming
C)Discount
D)Sliding-down-the-demand-curve

Question 20

When a small business practices price lining,it most commonly carries lined merchandise in sets of ________ different ranges.

A)2
B)3
C)4
D)5

Question 21

When a computer manufacturer offers its computer with software pre-installed,a printer,and Internet service,as all part of one price,the manufacturer is using a:

A)bundling strategy.
B)multiple pricing strategy.
C)suggested retail price strategy.
D)skimming pricing strategy.

Question 22

When a small business is faced with price competition from a much larger competitor,it should consider:

A)going head-to-head on prices by lowering its cost structure.
B)using non-price competition by offering value added service.
C)make rapid,continual price changes to keep the competition off balance.
D)move to a premium price strategy by offering higher scale goods and services.

Question 23

A common "me-too" pricing policy by which the small business owner establishes his/her prices by monitoring competitor's prices and then matching them is called:

A)follow-the-leader pricing.
B)below-market pricing.
C)price lining.
D)variable pricing.

Question 24

If a haberdasher purchases a tie for $12 and plans to sell it for $18,the percentage of retail price markup would be:

A)33%.
B)50%.
C)175%.
D)100%.

Question 25

Absorption costing:

A)is complete pricing in that it takes into consideration all manufacturing and overhead costs.
B)guarantees the manufacturer a desired profit margin.
C)does not encourage a manufacturer to operate efficiently.
D)clouds the true relationship of price,volume,and costs.

Question 26

The most commonly used pricing technique for manufacturers is:

A)direct pricing.
B)margin pricing.
C)cost-plus.
D)absorption pricing.

Question 27

________ include(s)the unit cost of a manufacturer's product under an absorption costing system.

A)Opportunity costs
B)Depreciation
C)Insurance
D)Variable costs

Question 28

Which of the following factors is vital to determining the effects of competition on the small firm's pricing policies?

A)The competitor's location
B)The availability of capital for production
C)The form of ownership of the small business
D)The type of outlet the business is

Question 29

Many small business owners use a ________ strategy to move stale,damaged,or slow moving goods or to encourage shoppers to purchase merchandise before an upcoming season.

A)multiple pricing
B)opportunistic pricing
C)discount pricing
D)price lining

Question 30

________ is the average markup required on all merchandise to cover the cost of items,incidental expenses,and a profit.

A)Initial markup
B)Cost plus markup
C)Direct markup
D)Contributing margin

Question 31

A reliable cost accounting system is necessary for accurate pricing.The traditional method of product costing,where the costs of direct materials,direct labor,and factory overhead are included,is called ________ costing.

A)absorption
B)break-even
C)direct
D)variable

Question 32

Probably the most important consideration a manufacturer has when setting the final price of its new exclusive perfume is:

A)the perfume's production cost.
B)competitor's prices.
C)the image the company wants to create for the scent in the customer's mind.
D)choosing between odd pricing and price lining.

Question 33

When considering the competition in price setting,the small business owner should:

A)consider the competitors' location.
B)consider the competitors' motives for their prices.
C)consider the nature of the goods being sold.
D)consider all of these.

Question 34

Dotty has her competitors' price information.Her most effective use of that information would be to:

A)seek to match her competitors.
B)undercut competitors' prices.
C)create a premium image by setting her prices higher than competitors.
D)use it as one variable in her pricing mix.

Question 35

Baseball cards usually sell for 10 cents each.The Card Shop advertises them at "12 for $1.00." This is:

A)price lining.
B)leader pricing.
C)odd pricing.
D)multiple unit pricing.

Question 36

When a small business owner doesn't want to make a pricing decision,he/she can use a(n)________ pricing strategy.

A)price lining
B)suggested retail
C)opportunistic
D)multiple unit

Question 37

If an item costs a small business owner $15,and the desired markup on it is 60%,its retail price would be:

A)$24.00.
B)$25.00.
C)$37.50.
D)$43.25.

Question 38

The Pastry Shop normally sells cheese Danishes for 60 cents each.On Mondays and Tuesdays,its slowest days,The Pastry Shop offers cheese Danishes at "4 for $2.00." This is:

A)price lining.
B)leader pricing.
C)multiple unit pricing.
D)odd pricing.

Question 39

Cost-plus pricing has several disadvantages,including:

A)it clouds the relationships among price,volume,and costs.
B)it fails to consider the competition sufficiently.
C)a mentality of "I-can-do-it-cheaper," leading to price competition with larger companies.
D)it tends to be reactive rather than proactive in relation to competition and market forces.

Question 40

________ is a pricing strategy under which local customers "subsidize" the shipping charges the firm incurs when transporting merchandise to distant customers.

A)FOB factory pricing
B)Uniform delivered pricing
C)Zone pricing
D)Opportunistic pricing

Question 41

________ tells what portion of the total revenues remains after covering variable costs to contribute toward meeting fixed expenses and earning a profit.

A)The full-absorption statement
B)The break-even selling price
C)The contribution percentage
D)Cost-plus pricing

Question 42

A customer who purchases a television from Ace Appliance Store and pays for it in 36 monthly payments is using:

A)trade credit.
B)charge account credit.
C)installment credit.
D)debit card credit.

Question 43

Brenda is starting her business by offering exclusive hand-bags.The desired image that she should set for her handbags is "exclusive." She should set the price at:

A)discount.
B)bargain.
C)value.
D)upscale.

Question 44

In most cases,a ________ pricing strategy is used to introduce relatively low priced goods into the market where no elite segment and little opportunity for differentiation exist.

A)skimming
B)penetration
C)geographic
D)opportunistic

Question 45

When developing a marketing approach to pricing,business owners must:

A)establish prices that are compatible with their customers' expectations and what they are willing to pay.
B)compete solely on price.
C)establish prices that are compatible with their customers' expectations and add a certain percentage to it.
D)establish prices that are compatible with their customers' expectations and subtract a certain percentage to it.

Question 46

Even in the short run,a small business must set the price of a product at least equal to the ________ costs (per unit),or it must shut down.

A)fixed
B)variable
C)total
D)invariable

Question 47

The price that business owners set depends on the desired image they want to create for their products or services.These images are:

A)discount.
B)value.
C)upscale.
D)All of the above

Question 48

Price ________ usually begin when one competitor believes that they can achieve a higher volume through lower price,or they believe that they can exert enough pressure on other competitors' profits to drive them out of business.

A)discounts
B)markdowns
C)war
D)penetration

Question 49

A variation of geographic pricing in which the small company sells its merchandise to customers on the condition that they pay all the shipping is called:

A)uniform delivered pricing.
B)F)O.B.factory.
C)zone pricing.
D)discounts.

Question 50

A firm sells small-ticket items to their regular customers on customer charge accounts and then bills the customers each month.This type of credit arrangement is called:

A)trade credit.
B)charge account credit.
C)installment credit.
D)debit card credit.

Question 51

To establish a reasonable,profitable price for service,the small business owner needs to know:

A)fixed and variable costs,the break-even point,and his/her contribution percentage.
B)competitors' prices,and costs of direct and indirect labor.
C)the cost of materials,direct labor,and overhead for each unit of service.
D)full-absorption costs,direct and indirect labor,and the break-even point.

Question 52

Uniform delivered pricing is a variation of:

A)opportunistic pricing.
B)leader pricing.
C)geographic pricing.
D)multiple pricing.

Question 53

Most service firms base their prices on:

A)fairly stable pricing policies.
B)the cost of the service plus an estimate of the value they add in delivering the service.
C)market surveys on their respective industries.
D)an hourly basis for services rendered.

Question 54

Customers that sell small-ticket items frequently offer their customers:

A)discounts.
B)installment credit option.
C)"store value" cards.
D)trade credit.

Question 55

F.O.B.factory is a variation of ________ pricing.

A)opportunistic
B)bundling
C)geographic
D)skimming

Question 56

________ costing includes only those costs that vary directly with the volume of an item produced.

A)Absorption
B)Break-even
C)Indirect
D)Direct

Question 57

Which price strategy is mostly used for moving stale,outdated,damaged merchandise?

A)Markdown pricing
B)Multiple pricing
C)Bundling
D)Skimming

Question 58

Price wars usually begin when:

A)the economy is in turmoil.
B)when there are more than 4 competitors.
C)when one competitor believes that they can achieve a higher volume through lower price.
D)small businesses enter the market dominated by bigger giants.

Question 59

For some customers,a higher price equals:

A)higher quality.
B)greater perceived value.
C)uniqueness.
D)All of the above

Question 60

XYZ manufactures computer hardware.The marketing executives,in order to increase the market share,forced a business to accept a suggested retail price and not to sell the items below the stated price.

A)This practice violates the Sherman Antitrust Act.
B)There is no violation.According to a recent Supreme Court decision,this is fine.
C)This practice violates the Fair Price Protection Act.
D)As long as the manufacturer offer rebates,they can do whatever they want.

Question 61

A ________ pricing strategy often is used when a company introduces a new product into a market with little or no competition.

A)price wars
B)competitive pricing
C)skimming
D)price floor

Question 62

Judith started her business in 1995.During the years,she sold different products she purchased from distributors and manufacturers.One day,she came up with a new product.She patented the product and got started to sell the product.What should be the objectives of her pricing strategies?

A)Get the product accepted
B)Maintain market share as competition grows
C)Earn a profit
D)All of the above

Question 63

All firms within an industry have the same price floor.

Question 64

Businesses faced with rapidly rising raw materials costs should consider the following strategies:

A)Communicate with customers and focus on improving efficiency everywhere in the company.
B)Emphasize the value your company provides to customers.
C)Anticipate rising materials costs and try to lock in prices early.
D)All of the above

Question 65

As sales volume increases with the broad acceptance of the new products,the firm can lower its price.This is a characteristics of:

A)price wars.
B)competitive pricing.
C)skimming.
D)penetration.

Question 66

Three objectives of new product pricing are:

A)get the product accepted,maintain market share as competition grows,and earn a profit.
B)get the product accepted,avoid price wars,and earn a profit
C)maintain market share as competition grows,earn profits,and increase sales
D)None of the above

Question 67

Which of the following is correct?

A)Sales - variable costs - fixed costs = contribution margin
B)Total revenue - variable costs = contribution margin
C)Total revenue - fixed costs = contribution margin
D)Total revenue - profit = contribution margin

Question 68

Two factors are vital to studying the effects of competition on a small firm's pricing policies:

A)the location of the competitors and the nature of the competing goods.
B)the pricing.
C)the location of the competitors and their marketing efforts.
D)Both A and B

Question 69

Price is a measure of what the customer must exchange to obtain goods and services and is an indicator of value to the customer.

Question 70

The price floor is established by:

A)by the firm's total cost.
B)by the consumers.
C)by the government.
D)None of the above

Question 71

For most products,there is an ideal price.

Question 72

________ pricing is when the base product is not functional without the appropriate accessory.

A)Captive-product
B)Optional-product
C)By-product
D)None of the above

Question 73

Price is the monetary value of a good or service in the marketplace.

Question 74

The problem with using ________ is that it clouds the true relationships among price,volume,and costs by including fixed expenses in unit cost.

A)full-absorption costing
B)variable costing
C)contribution margin
D)break-even

Question 75

Small businesses whose pricing decisions are greatly affected by the costs of shipping merchandise to customers across a wide range of geographic regions frequently employ one of the ________ techniques.

A)opportunistic pricing
B)geographic pricing
C)leader pricing
D)price lining

Question 76

Proper pricing is a balancing act,walking between a high enough price to cover profit margins and convey the right image and low enough to attract customers.

Question 77

Which of the following is a fair definition of price?

A)In purely economic terms,price is the monetary value of a good or service.
B)Price is a measure of what a customer is required to give up to obtain a good or service.
C)None of the above
D)Both A and B

Question 78

________ is grouping together several products or services,or both,into a package that offers customers extra value at a special price.

A)Leader pricing
B)Price lining
C)Discount pricing
D)Bundling

Question 79

Most often,small business owners ________ their goods and services,believing that ________ prices are the only way they can achieve a competitive advantage.

A)over price;high
B)under price;low
C)over price;low
D)under price;high

Question 80

The price floor of a product or service is set by the company's cost structure.