MKTG 3650 Chapter 15 Practice Test

Six ounces of Keith's Gourmet Beef Jerky sells for $10.50. The fixed costs for its manufacturer totals $5,000,and each 8-ounce package of beef jerky has a variable cost of $6.50. Compute the dollar break even point.

$13,100

Rocky Mountain Gift Products sold its products 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 Rocky Mountian Gifts Products receive on the sale of this product? (Select the closest answer)

$15.00

A retailer pays $75 for a leather jacket and desires a 65% mark-up on products of this type. What will be the price to consumers for this jacket (Select the closest answer)

$214

On May 15, Ann's Café received a $265 invoice for restaurant supplies. The invoice offered the following terms, "3/14, n/30." If Ann pays the invoice by May 25, she should make her check out for: (Select the closest answer).

$255

The total fixed costs for a manufacturer of road maps is $25,000, and its unit variable cost is $3. The company sells 20,000 maps and just breaks even. What is the map's selling price? (Select the closest answer).

$4.25

A manufacturer of a very labor-intensive product wishes to employ the 'experience curve' to predict the AVC associated with various levels of cumulative production volume. Based on the first lot of 1,000 units, AVC are $12.50 per unit. You may assume that this level of AVC is attained at the point where the first 1,000 units are produced. The producer expects an experience constant or rate of about .9. The producer can expect AVC of ____________ with the third doubling (within $.10).

$9.11

Blue Ridge Knives wants to set its selling price on a custom knife so that the retail list price will be $150--taking into account markups of 10 percent at wholesale and 30 percent at retail. At what price should Blue Ridge Knives sell the item to wholesalers? (Select the closest answer).

$95.00

Consider the following data: TFC = $1,500,000 per year; price = $.79; AVC = $.39. What is the Unit Contribution? (Select the closest answer)

.39

Organic Specialties sells organic mixes for soups. The company produces 5,000 packages per day. The total variable cost for making one bag of Organic split pea soup is $3. The average fixed cost per bag is $.90. The company charges $6.50 per bag and earns a 40 percent profit. Calculate the break-even point in units.

1,300

Rocky Mountain Furniture Co. has total fixed costs of $100,000 a year. The owner estimates that average variable costs for its products are $135 next year. Products are sold directly to retailers through a broker. The broker's commission is included in the estimate for variable costs. The average selling price to retailers will be $175. If total industry sales are expected to be about $5,000,000 next year, what market share does Rocky Mountain Furniture need to break even?

10%

The rent for a booth at the local flea market is $150 per month with a $15 charge for utilities. The variable cost per picture frame sold is $5. The selling price for each frame is $20. Calculate the break-even point in units. (round to the nearest unit).

11

Cash discount terms of 2/10, net 60 on an invoice would--in effect-- amount to borrowing at an annual interest rate of about ________ percent if the buyer did not pay the invoice within the 10 days allowed.

14

Given the following data, find the break-even point in units: TFC = $1,500,000 per year; price = $.79; AVC = $.39. (Select the closest answer).

3,750,000

The Gulfport Cycle Shop bought two motorcycles for a total of $2,000 and sold each one for $1,500. The markup percent(based on selling price)was closest to:

30%

DrainKing produces an excellent professional drain-cleaning machine sold to plumbing businesses. The total variable costs for making each unit are $325.00. DrainKing's average selling price for the unit is $750.00. DrainKing's fixed costs of production and sales are $4,500 per month. If DrainKing desires $10,000 in profit each month, how many units must it sell each month? (Select the closest answer)

34

A retailer pays a wholesaler $24.00 for an item and then sells it with a 50 percent markup based on cost. The retailer's selling price is: (Select the closes answer)

36.00

Assume that you are estimating the demand curve for a product using buy-response data and have collected the following via a survey: Price % Who Will Buy 5.00 1% 4.75 10% 4.50 25% 4.25 45% 4.00 60% 3.75 75% 3.50 90% Assume that research suggests that your target market consists of approximately 500,000 persons. You anticipate that each buyer will purchase an average of 1.5 units of the product. What level of demand can you expect at the $4.00 price? (round to the nearest unit).

450,000 units

Consider the following data: TFC = $1,500,000 per year, price = $.79; AVC = $.39. What is the Contribution Margin?

49%

A manufacturer sells a product for $35 to a wholesaler, and the wholesaler sells it to a retailer. The wholesaler's normal markup (based on selling price) is 20%. The retailer prices the item to consumers to include a 30% markup (also based on selling price). What is the selling price to the consumer? (Select the closest answer)

63.00

For which of the following products would a retailer be LEAST likely to use odd pricing?

A designer evening dress

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using

Captive product pricing

Break-even analysis is normally conducted during the __________ stage of the price setting process.

Cost-volume-profit analysis

When a seller attempts to employ promotion to shift the demand curve for its product to the right, such efforts represent:

Non-price competition

When firms seek to differentitate their product offerings by emphasizing different promotion techniques they are said to be employing ___________ .

Non-price competition

A tire retailer is advertising a very low price on a popular size tire. When a customer comes into the store, the clerk says the low-priced item is sold out, and tries to convince the customer to buy the top-of-the-line model--claiming the low priced model is not a very good buy even at the low price. This is an example of:

Bait pricing

Consumers normally pay for film and processing separately. When Eckerd Drugstores advertises one price for the cost of a roll of film and this price includes the cost of processing the film, they are using

Bundled pricing

The ____________ is defined as those prices bounded by customer demand at the high end and costs at the low end.

Competitive price range

Which of the following is least associated with the concept of 'price competition?'

Consumers are more likely to be price inelastic

Which of the following is the major disadvantage of nearly all cost-based pricing methods?

Cost-based pricing techniques generally fail to account for consumer demand at the prices set with such techniques

Custom Creamery located in South Dallas makes 2,000 pies per day. The total cost per raspberry-apple pie is $2.25. Its average fixed costs equal $1.00 per pie. The company has calculated that if its charges $4.50 per pie, it will realize a 55 percent profit on the total cost of each pie. What pricing method is Custom Creamery using?

Cost-plus pricing

Every time you buy a protein shake at Discount Sport Nutrition (DSN) you can have your Discount Sport Nutrition card punched. When the card has 12 punches, your thirteenth shake is free. DSN is using a _____ discount.

Cumulative quantity

A retail firm that uses leader pricing is:

Cutting the regular price on a few items with the hope of attracting customers.

With respect to the product life cycle, prices are usally lowest during the ___________ stage.

Decline

Which of the following best defines the meaning of "e" - the coefficient of elasticity?

Defines the percent change in quantity demanded for every one percent change in price

The "law of demand" is associated with:

Demand decreases as price increases.

Noncumulative quantity discounts are primarily offered by a seller in order to:

Encourage larger individual orders

The Wine Emporium features wines from all over the world. Along with its wines, the firm sells "The Complete Wine Guide" for $4.99. It sells this book at a price substantially below its regular retail price of $19.95 in order to attract wine shoppers to its store and increase its wine sales. This would be an example of:

Leader pricing

Which of the following is least likely to cause problems when employing historical data to estimate demand curves?

The seller introduced several new products that were considered to be category extensions during the time in question.

Joe lives in Hawaii and is a frequent buyer of antiques on Internet auction sites. He is used to paying higher shipping costs than his brother who lives in Colorado and who also likes to buy antiques on the Internet. The price differential is most likely because:

The seller probably was using zone-delivered pricing.

Which of the following is least likely to be a condition necessary for employing a skimming pricing strategy?

A large, highly price-elastic market exists for the product

_________ is the only marketing mix element that generates revenue for the firm

Price

When consumers assign "value" to products and services they take into account which of the following? A. The price of the product or service B. The benefits received from the product or service C. The emotional costs associated with obtaining the product or service D. The effort that must be expended in acquiring the product or service E. All of the above

All of the above are part of the value equation.

A manufacturer of a very labor-intensive product wishes to employ the 'experience curve' to predict the AVC associated with various levels of cumulative production volume. Based on the first lot of 1,000 units, AVC are $12.50 per unit. You may assume that this level of AVC is attained at the point where the first 1,000 units are produced. The producer expects an experience constant or rate of about .9. The experience constant or experience rate is interpreted as:

AVC declines by 10% with each doubling of cumulative output

Firms that are pursuing a strategy of price competition are more likely to:

Aggressively use lower prices to buy market share from competitors

For which of the following products would a manufacturer be most likely to offer a seasonal discount?

Air conditioning system

The AVC curve is typically 'u-shaped' because: A. Scale economies initially drive unit variable costs down as sales volume increase. B. The experience curve tends to drive unit variable costs down as producers become more knowledgeable of how to make products. C. Unit variable costs tend to increase after some level of output due to 'diseconomies of scale' D. None of the above E. All of the above

All of the above

The likely consequences of firms choosing to engage in price competition include all of the following except __________. A. Higher probability of price wars with other firms. B. Lower overall profits for firms in the industry. C. Higher levels of scrutiny by federal and state regulatory agencies. D. Greater tendency for firms to collude with one another to maintain prices E. All of the above

All of the above

With respect to the coefficient of elasticity, a value of "e" equal to -1.5 means that: A. Demand changes by -1.5% for each 1% change in price B. For every 1% change in price, demand changes by -1.5 times that amount C. Demand is price elastic D. Demand and price are inversely related E. All of the above

All of the above

A manufacturer could try to defend itself against charges of price discrimination under the Robinson-Patman Act by claiming that:

All of the above are possible defenses against price discrimination charges.

A manufacturer has set the initial price of its product below the product's AVC. The manufacturer assumes that the low price will be attractive to enough consumers so that market share can be acquired very rapidly. The producer further assumes that, as additional market share is attained, AVC will be reduced substantially. In fact, when total sales hit the 20,000 unit point, the producer expects AVC to drop below price. The manufacturer is most likely making use of:

Experience curve effects

With which geographic pricing strategy is the seller likely to have the lowest freight charge?

FOB mill pricing

Yesterday Delta Press in Dallas, Texas shipped 1,000 books to a retailer in Florida, 150 books to a retailer in Georgia, and 50 books to a buyer in Montana. However, Delta Press paid no freight charges. Which geographic pricing strategy did Delta use?

FOB plant pricing

Even when production stops (i.e. no units produced), the firm still generally incurs some _________.

Fixed production costs

Texas Cable Corporation, sells heavy guage wire cable to construction companies around the country. Customers pay shipping from Texas Cable's warehouse in Dallas. Recently, a new competitor in Florida has been taking away some of Texas Cable's Southern customers. If Texas Cable wants to compete in these distant markets, but not increase the cost of its product to other customers, it would probably switch to

Freight absorption pricing

In order to offset the competitive disadvantage of FOB plant pricing, Texas Granite Company in Dallas could use _____ pricing to ship its products to building contractors and furniture restorers in any part of the United States.

Freight-absorption

The strategy of market-skimming pricing is especially suited for new products because:

High initial prices can keep demand from exceeding supply

Products that are intended to convey prestigious or high quality images usually are priced _____________ .

Higher than other brands in the product category

Assume that a number of Texas oil refiners decide to work together to unformly restrict output with the goal of stablizing declining prices. These firms are likelyl to be accused of ____________ .

Horizontal price fixing

___________ entails pricing agreements between two or more firms operating at the same supply chain level.

Horizontal price fixing

Prices for products are usually at their highest point during the ________________ stage of the product's life cycle.

Introduction

Humphrey Studio sells reproductions of European antiques. Last year sales were disappointing. The studio owner decided to increase the price of each item by about 25%. The next year there was a 20% increase in units sold. The studio apparently experienced:

Inverse demand

The final step in the price setting process is __________.

Managing price

When Nintendo video games were introduced into the United States, they were priced at an introductory price of $299. This price was $100 lower than the Sega games. Nintendo probably used _____ a pricing strategy to quickly gain a large share of the market.

Market penetration

The expected price for sunscreen is in the $4 to $6 price range. The introductory price for Shade UVA Guard by Schering-Plough was set high ($9.99) to recover its research and development costs. Schering-Plough was using a _____ strategy.

Market-skimming

Organic Building Products Co. wants to keep its inventory low. Which of the following would be MOST likely to encourage customers to take over more responsibility for the storage function?

Offering a noncumulative quantity discount

Which of the following pricing strategies would you suggest to a retailer that wishes to encourage price-sensitive shoppers to postpone their purchases until the planned time of the sale for those products the retailer intends to place on sale:

Periodic discounting

A profit-oriented manufacturer of a consumer durable product faces a demand curve that is upward sloping to the right until extremely high prices are reached. For these latter prices, the demand curve tips over and is downward sloping. Which of the following pricing approaches is most consistent with the demand curve described?

Prestige pricing

A penetration pricing strategy is most likely to be used when pricing objectives focus on:

Preventing competitive entry by signaling competitors that profit potential is limited due to small or non-existent margins.

________ is variously called rent, tuition, interest, fee, toll, wage, commission, dues, salary, bribe, blackmail, and more.

Price

__________ is a measure of the utility that exists or is perceived to exist in a product.

Price

__________ is the amount of money or other form of remuneration that is charged for products or services.

Price

In the price setting process, __________ are considered to be the role that price is expected to play in the firm's marketing program.

Price objectives

In the price setting process, __________ are the fundamental approaches to setting and managing price to achieve the firm's objectives.

Price strategies

Understanding costs faced by the firm when making pricing decisions is important because:

Prices must be set with a knowledge of the costs required to make and sell the product.

___________ are tactical pricing elements that typically reduce the computed base price of a product and help firms manage demand for the product.

Pricing discount

___________ are tactical pricing elements that are intended to aid supply chain members in promoting the firm's product at the retail level.

Promotion allowances

For featuring Lego Sets prominently in its store window, Toy Emporium, a store that carries educational toys, received a free motorized Ferris Lego Wheel kit, valued at $150. This is an example of a:

Promotional allowance

Revlon cosmetics paid one-half of the advertising cost for the large retail chain Macy's to run a series of ads on local cable TV channels. Each of the ads emphasized that Macy's carried the complete line of Revlon products. This would be an example of a:

Promotional allowance

Some manufacturers give ______________ to retailers to pass on to the retailers' sales clerks to encourage aggressive selling of specific items or lines.

Push money

Producers offer ___________ to encourage customers to buy in larger amounts or to make most of their purchases from the same seller.

Quantity discounts

The likely consequences of firms choosing to engage in non-price competition include all of the following except __________.

Reduced ability to raise prices

Alberton's supermarket prominently displays the prices of its brands side-by-side with prices you may pay at competing grocery stores for the same brand. Albertson's hopes stimulate added sales inducing the perception that consumers are getting a 'deal.' Alberston's is using:

Reference pricing

John is considering the purchase of a new car. As he evaluates the brands in which he is most interested he is becoming increasingly concerned with the trade-offs between performance, style, quality, and comfort and price. He is also beginning to think about the other "costs" of acquiring the car such as what others will think of his choice. John apparantley is evaluating the ___________ of the alternatives being considered.

Relative values

The typical markup (expressed as a percent) is the:

Selling price minus the cost of the item, divided by the selling price--times 100.

A reduction from list price given to middlemen to get shelf space for a product is a:

Slotting allowance

One of the major difficulties of zone-delivered pricing is determining zone boundaries _____________ .

So as to avoid charges of illegal price discrimination

When setting prices, the price floor is usually defined by ______ of producing and marketing the product.

The average total costs

When a seller offers a cash discount with terms of 3/10, n/60, this means:

The buyer gets a discount of 3 percent if the bill is paid within 10 days; otherwise the entire amount is due in 60 days.

A retailer might expect a stocking allowance:

To offset the handling costs for a new product.

In price determination, given a particular selling price, the break-even point is where:

Total costs of the product equals total sales revenue from the product.

_____ are reductions from the list price offered to middlemen in payment for marketing functions they will perform.

Trade or functional discounts

The term "price competition" in a marketing context means that firms have opted to employ price aggressively as a major component of their marketing program.

True

Which method for estimating demand curves is least appropriate for the marketer of a new product.

Using historical ratios

Wendy's fast-food restaurant chain priced several of its more popular menu items at $.99 while raising the price of some of its upgraded meal deals. This pricing strategy is an example of _____ pricing because the chain is trying to improve the customer's perception of the ratio of benefits received to the product's price.

Value

_______ is the ratio between the utility you receive from a product and the price you give up in exchange for that product.

Value

Last summer, to earn money for their college tuition, George and Tom operated a food kiosk at Clearwater Beach, Florida for 3 months. They sold soft drinks, chips, crackers, and candy bars. A month before they were planning to open, Larry found a location that rented for $500 a month and a small refrigerator unit which they rented for $60 per month. Alan found distributors for the food products as well as for the paper products that they would need. Alan also purchased a business license for $80 and bought 3-month's worth of liability insurance for $100. The cups, straws, napkins, and extra sales people needed to staff the stand are all examples of:

Variable costs

When production stops (i.e. no units produced), _________becomes zero.

Variable costs of production