Question 1

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

Accepted Answer

A) True 
 B)False

Question 2

The major disadvantage of price lining is that it is complicated for both clerks and customers.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Business customers are sometimes less price sensitive if there are switching costs.

Accepted Answer

A) True 
 B)False

Question 5

"Demand-backward" pricing:

Accepted Answer

A)   starts with an acceptable final consumer price and works backward to what producers can charge.
B)   ignores demand estimates.
C)   is only sensible when the channel captain is a large retailer.
D)   is an average-cost pricing approach.
E)   None of these alternatives is correct.F) B) and E)
G) B) and D)

Question 6

The major weakness of "average-cost pricing" is that:

Accepted Answer

A)   it ignores likely customer demand at different prices.
B)   it usually leads to losses instead of profits.
C)   it always results in a profit that is less than expected.
D)   it is too hard for most managers to use.
E)   All of these are major weaknesses of "average-cost pricing."F) A) and B)
G) A) and C)

Question 7

Total cost:

Accepted Answer

A)   increases directly with increases in total variable cost.
B)   is zero at zero output.
C)   is fixed in total no matter how much is produced.
D)   increases directly with increases in total fixed cost.
E)   None of these alternatives is correct.F) B) and D)
G) A) and E)

Question 8

Different firms in the same line of business are likely to use the same markup percent:

Accepted Answer

A)   because they all want to have the same selling price.
B)   because this is a government requirement.
C)   because they are likely to have similar operating expenses.
D)   because this is what is acceptable to manufacturers.
E)   only if they are in pure competition.F) A) and D)
G) A) and C)

Question 9

Which of the following observations is true?

Accepted Answer

A)   The break-even point can also be figured in dollars.
B)   For a single price, multiple break-even points are possible.
C)   Beyond the break-even point, profits will grow continually.
D)   At break-even point, a firm will cover only its variable costs.
E)   At break-even point, a firm will cover only its fixed costs.F) None of the above
G) All of the above

Question 10

A markup chain:

Accepted Answer

A)   only applies to consumer products, not to business products.
B)   implies that a retailer must always apply a smaller markup than a wholesaler.
C)   causes lower prices in longer channel systems.
D)   determines the price structure in a channel of distribution.
E)   None of these alternatives is correct.F) D) and E)
G) A) and B)

Question 11

Break-even analysis is particularly accurate because it recognizes that the demand curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 12

A producer with only one product has total fixed costs of $15,000 per month. In addition, it cost the producer $100 in variable costs to produce each unit of his product (raw materials and direct labor cost) . The producer charges his wholesalers $125 per unit. What is the sales amount to break even?

Accepted Answer

A)   $70,000
B)   $75,000
C)   $80,000
D)   $85,000
E)   $90,000F) C) and D)
G) All of the above

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.
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)   $18.00F) A) and C)
G) B) and E)

Question 14

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.F) A) and B)
G) B) and C)

Question 15

If a service firm sets a specific price for each possible job-rather than setting a price which applies for all potential customers-it is most likely using:

Accepted Answer

A)   product-bundle pricing.
B)   a one-price policy.
C)   price lining.
D)   average-cost pricing.
E)   bid pricing.F) All of the above
G) A) and D)

Question 16

A _____ is a dollar amount added to the cost of products to get the selling price.

Accepted Answer

A)   markup
B)   rebate
C)   list price
D)   spiff
E)   dealF) A) and B)
G) A) and C)

Question 17

Given the following data, determine the break-even point in units: Total fixed cost = $120,000
Variable cost per unit = $0.60
Selling price per unit = $1.10

Accepted Answer

A)   100,000
B)   240,000
C)   200,000
D)   218,182
E)   50,000F) B) and D)
G) B) and C)

Question 18

A college "marketing club" printed 1,000 "We're Number 1" bumper stickers for sale at $3.00 each as a fund-raiser. Its fixed costs were $500, and the variable cost for each sticker was $.50. The club's average cost per unit was:

Accepted Answer

A)   $2.00.
B)   $2.50.
C)   $0.50.
D)   $1.00.
E)   There is not enough information to tell.F) A) and C)
G) All of the above

Question 19

Leader pricing is normally used with products for which consumers do have a specific reference price.

Accepted Answer

A) True 
 B)False

Question 20

Regarding markups and turnover:

Accepted Answer

A)   supermarket operators have found that high-margin products are generally more profitable than low-margin products.
B)   higher markups always lead to higher profits.
C)   low stockturn rates increase costs by tying up working capital in inventory.
D)   to earn higher profits, all firms should lower their markups and seek faster turnover.
E)   None of these alternatives is correct.F) C) and D)
G) B) and D)

Exam 17: Price Setting in the Business World

A college "marketing club" printed 1,000 "We're Number 1" bumper stickers for sale at $3.00 each as a fund-raiser. Its fixed costs were $500, and the variable cost for each sticker was $.50. The club's average cost per unit was:

Correct Answer
verified

Regarding markups and turnover:

Correct Answer
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A markup chain:

Correct Answer
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Total cost:

Correct Answer
verified

Leader pricing is normally used with products for which consumers do have a specific reference price.

Correct Answer
verified

Business customers are sometimes less price sensitive if there are switching costs.

Correct Answer
verified

Correct Answer
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The major disadvantage of price lining is that it is complicated for both clerks and customers.

Correct Answer
verified

Given the following data, determine the break-even point in units: Total fixed cost = $120,000 Variable cost per unit = $0.60 Selling price per unit = $1.10

Correct Answer
verified

Which of the following observations is true?

Correct Answer
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If a service firm sets a specific price for each possible job-rather than setting a price which applies for all potential customers-it is most likely using:

Correct Answer
verified

A _____ is a dollar amount added to the cost of products to get the selling price.

Correct Answer
verified

Gross margin is expressed as

Correct Answer
verified

Break-even analysis is particularly accurate because it recognizes that the demand curve is downward sloping.

Correct Answer
verified

The major weakness of "average-cost pricing" is that:

Correct Answer
verified

"Demand-backward" pricing:

Correct Answer
verified

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

Correct Answer
verified

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

Correct Answer
verified

Different firms in the same line of business are likely to use the same markup percent:

Correct Answer
verified

Correct Answer
verified

Exam 17: Price Setting in the Business World

A college "marketing club" printed 1,000 "We're Number 1" bumper stickers for sale at $3.00 each as a fund-raiser. Its fixed costs were $500, and the variable cost for each sticker was $.50. The club's average cost per unit was:

Correct AnswerverifiedShow Answer

Regarding markups and turnover:

Correct AnswerverifiedShow Answer

A markup chain:

Correct AnswerverifiedShow Answer

Total cost:

Correct AnswerverifiedShow Answer

Leader pricing is normally used with products for which consumers do have a specific reference price.

Correct AnswerverifiedShow Answer

Business customers are sometimes less price sensitive if there are switching costs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The major disadvantage of price lining is that it is complicated for both clerks and customers.

Correct AnswerverifiedShow Answer

Given the following data, determine the break-even point in units: Total fixed cost = $120,000 Variable cost per unit = $0.60 Selling price per unit = $1.10

Correct AnswerverifiedShow Answer

Which of the following observations is true?

Correct AnswerverifiedShow Answer

If a service firm sets a specific price for each possible job-rather than setting a price which applies for all potential customers-it is most likely using:

Correct AnswerverifiedShow Answer

A _____ is a dollar amount added to the cost of products to get the selling price.

Correct AnswerverifiedShow Answer

Gross margin is expressed as

Correct AnswerverifiedShow Answer

Break-even analysis is particularly accurate because it recognizes that the demand curve is downward sloping.

Correct AnswerverifiedShow Answer

The major weakness of "average-cost pricing" is that:

Correct AnswerverifiedShow Answer

"Demand-backward" pricing:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

Correct AnswerverifiedShow Answer

Different firms in the same line of business are likely to use the same markup percent:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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