The Game

14. Which of the following is often included in a marketing plan's situation analysis: A. A SWOT analysis chart B. Performance standards for implementing the plan C. A list of the proposed strategies and programs D. A list of the company's marketing objectives

A A SWOT analysis chart. A SWOT analysis chart is often included in a marketing plan's situation analysis section. The chart summarizes the company's internal strengths and weaknesses as well as its external opportunities and threats. Performance standards for implementing the plan are listed in the performance and implementation section. A list of proposed strategies and programs can be found in the marketing strategies section. A list of marketing objectives can be found in the marketing objectives and issues section

16. Which of the following items might be included in a marketing plan's appendix: A. The organization's mission statement C. A product photograph B. A list of marketing objectives D. A SWOT analysis chart

C A product photograph. A product photograph might be included in a marketing plan's appendix. The appendix contains charts, graphs, and other miscellaneous items related to the plan. It would not include a list of marketing objectives (those would be in the marketing objectives section), the organization's mission statement (that would be in the executive summary), or a SWOT analysis chart (that would be in the situation analysis).

41. During which stage of the product life cycle is a business likely to try to stabilize a product's price? A. Expansion C. Obsolescence B. Introductory D. Maturity

D Maturity. The product life cycle refers to the stages that goods and services move from the time they are introduced on the market until the time they are taken off the market. The life cycle of the product affects how it is priced. During the maturity stage of the product's life, the product is firmly in the marketplace, its sales peak, and then sales increase at a slower rate, before beginning to decline. During the maturity stage, the business focuses its efforts on stabilizing prices so it can maintain a share of the market. During the introductory stage, the business usually prices a product higher to enable the business to recover its investment in the new product. As the product enters obsolescence, sellers reduce prices to get rid of it. Expansion is a stage in the business life cycle, not the product life cycle.

44. Calculate the break-even point in dollars if a business has total fixed costs of $875,000; the unit selling price is $1,200; and the variable cost per unit is $700. A. $2,700,000 C. $1,200,000 B. $1,500,000 D. $2,100,000

D $2,100,000. The break-even point in dollars is calculated by determining the break-even point in units and multiplying that figure by the selling price per unit. In this situation, first determine the variable-cost margin by subtracting the variable cost per unit from the unit selling price ($1,200 - $700 = $500). Next, divide the total fixed costs by the variable-cost margin ($875,000 / $500 = 1,750 units). Multiply the number of units by the selling price per unit to obtain break-even point in dollars (1,750 x $1,200 = $2,100,000).

21. What do businesses often take into consideration when forecasting sales for marketing plans? A. Competitors' market share C. Location of regional territories B. Quotas for salespeople D. Company's profit goals

A Competitors' market share. Market share is a business's portion of the total industry sales in a specific market. Since one business usually does not have all of the sales in one market, it is important to consider its competitors' market share when forecasting sales. For example, if competitors currently sell to 75% of the market, it would be unrealistic for a business to predict that it could obtain a 50% market share next year. However, the business might increase its sales forecast from 25% of the market to 30% if there were indications that it was becoming more competitive. When forecasting sales for marketing plans, businesses do not consider quotas for salespeople, location of regional territories, or company profit goals.

29. What does a business need to consider when developing a marketing budget? A. Cost of performing marketing activities C. Value of spending money on advertising B. Forecasts of future sales figures D. Expense associated with offering credit

A Cost of performing marketing activities. Businesses need to develop budgets to set aside the funds that will be needed to perform marketing activities. Before they can develop budgets, they need to determine the cost of performing those marketing activities. For example, businesses need to consider wages paid to employees and the cost of buying supplies. Once a business calculates all the costs involved, it can develop a budget to fund the marketing activity. It is not effective to develop marketing activities without setting a budget to pay for the activities. Businesses do not consider forecasts of future sales figures, value of spending money on advertising, or the expense associated with offering credit when developing a marketing budget.

33. The marketing objectives that a business develops for its marketing plan should lead to a(n) A. increase in sales. C. decrease in costs. B. increase in prices. D. decrease in taxes.

A Increase in sales. Marketing objectives are the goals a business seeks to reach with its marketing plan. The overall purpose of developing marketing objectives is to increase sales. If the objectives do not result in an increase in sales, the business should develop different marketing objectives. For example, a goal might be to increase its customer base by 10% in one year, which will lead to an increase in sales. A marketing plan is a set of procedures or strategies for attracting the target customer to a business. Therefore, the marketing objectives focus on customers and sales rather than a decrease in costs, an increase in prices, or a decrease in taxes.

47. A business determines the final cost of a product purchased for resale by subtracting allowed discounts and transportation charges from the A. list price. C. operating expenses. B. net profit. D. accounts receivable.

A List price. The starting point for determining the final cost of a product to a company is the vendor's list price. From that price, businesses negotiate discounts and transportation charges that are deducted from the published price to arrive at the final cost. Net profit is money remaining after operating expenses are subtracted from gross profit. Operating expenses are expenditures necessary to keep the business running, such as payroll. Accounts receivable are all monies owed to a firm by its customers.

11. The Barker Company is determining which channel of distribution to use by considering the number of potential customers in various geographic regions. The company is focusing on A. market factors. C. product benefits. B. branding issues. D. employees' capabilities.

A Market factors. When a business selects its channels of distribution, it considers market factors, including the geographic location of the target market. If a target market is clustered in a few geographic regions, a business might decide that it would be cost effective and more efficient to sell direct than it would be to sell through several wholesalers. On the other hand, if the target market covers several large geographic regions, the business might use several wholesalers or set up regional sales offices and/or distribution centers. Other market factors that a business considers include the type of market and the average size of an order. Branding issues and product benefits are product factors that the business considers, and employees' capabilities are organizational factors that the business considers.

27. Businesses often select marketing metrics that will help them compare current market share with A. market potential. C. brand recognition. B. inventory turnover. D. transaction size.

A Market potential. The use of marketing metrics enables businesses to evaluate and measure specific aspects of their marketing plans. One aspect of a plan usually involves a business's current market share because the goal of most marketing plans is to increase market share. Market share is a business's portion of the total industry sales in a specific market. The total industry sales is the market potential. By comparing current market share with market potential, a business will be able to measure the ability of its marketing efforts to increase market share. Businesses do not compare market share with inventory turnover, brand recognition, or transaction size.

26. One reason why businesses select marketing metrics is to use them as a(n) A. measurement tool. C. promotional activity. B. operating strategy. D. selling procedure.

A Measurement tool. Businesses select marketing metrics to use them as a tool to measure or evaluate various aspects of the marketing plan. The metrics are specific to the aspect being measured and are intended to track success. For example, a business might select metrics to measure the effect of certain pricing strategies on sales revenue. Businesses do not select marketing metrics to use them as an operating strategy, a promotional activity, or a selling procedure.

4. A channel task should be performed by the channel member who A. performs it best. C. has the most money. B. has the least money. D. wants to perform it.

A Performs it best. A channel task should be performed by the channel member who performs it best. This allows the channel to be more effective and efficient and benefits all channel members. Channel tasks should not be assigned based on how much money a member has or a level of desire to perform the task.

12. During the distribution channel selection process, a producer should consider an intermediary's services, its availability, and its A. policies. C. origins. B. theories. D. scales.

A Policies. When a business selects a channel of distribution, it must consider whether it is feasible to use a certain intermediary (i.e., wholesaler, retailer). Some factors that the business must consider include an intermediary's capabilities (e.g., services) and its policies. If the producer's and an intermediary's policies are incompatible, there is likely to be conflict, which can create ongoing relationship problems. Therefore, the producer would want to select another intermediary whose policies align closely to its own policies. The producer would not consider theories, origins, or scales when selecting a channel of distribution.

6.What distribution channel is most often used to distribute consumer goods? A. Producer to wholesaler to retailer to consumer B. Producer to retailer to consumer C. Producer to consumer D. Producer to agent to wholesaler to retailer to consumer

A Producer to wholesaler to retailer to consumer. The majority of consumer products are distributed through an indirect channel. Most retailers, such as hotel gift shops, cannot buy the large quantities producers sell, so producers use wholesalers to sell to the smaller retailers. Wholesalers buy large quantities from producers and divide them into smaller units for sale to retailers.

13. Which of the following should be included in a marketing plan's executive summary: A. The organization's mission statement B. A description of the target market(s) C. The names and numbers of marketing team members D. A SWOT analysis chart

A The organization's mission statement. The executive summary serves as an introduction to the marketing plan and should include the organizational mission statement. A description of the target market(s) is included in the section for desired target market. The names and numbers of marketing team members are not included in a marketing plan. A SWOT analysis chart is included in the situation analysis section.

38. Why do some new companies set their selling prices as low as they can? A. To get market share as fast as possible C. To earn a high return on investment B. To eliminate all possible competition D. To quickly make a large profit

A To get market share as fast as possible. Businesses may use selling price to obtain a share of the market, to enlarge the share they already have, or to maintain that share. For example, some new companies set low prices in order to get as much of the market as possible right from the start. They feel that they will benefit over time because the customers who are attracted by the low prices will become regular customers. Because the selling prices are low, the business will not make a large profit or earn a high return on investment. It is illegal for businesses to deliberately set prices so low that they eliminate all competition.

39. What is the purpose of sales-oriented pricing objectives? A. To increase the total amount of sales income B. To create profits for the business C. To increase the return on investment D. To guarantee the survival of the business

A To increase the total amount of sales income. The purpose of sales-oriented pricing objectives is to increase the total amount of income from sales. There are two ways a business can do this. One way is to charge low prices in an effort to increase the volume of sales. The alternative is to charge high prices in an effort to increase the dollar value of its sales. The purpose of profit-oriented pricing objectives are focused on creating profits for the business. Some of the objectives a business might achieve through profit-oriented pricing include survival of the business and return on investment.

34. Why would a manager of a local business keep track of the prices that similar businesses in the area are charging? A. To remain competitive C. To promote an image B. To improve advertising D. To offer new services

A To remain competitive. Businesses need to be aware of the prices being charged by similar businesses in the area. One business would not want to charge significantly more than its local competitors are charging for similar goods and services. If a business does not monitor what others are charging and sets high prices, it might lose customers because it is not competitive. Businesses do not keep track of the prices that similar businesses are charging in order to improve their advertising, offer new services, or promote an image. However, businesses may follow the lead of their competitors when developing advertising, offering new services, and promoting an image.

32. When an business allocates a certain amount of money in relation to the amount of goods and services that it sold the previous year, it is setting its marketing budget by A. using the percentage-of-sales method. B. reviewing industry standards. C. considering its competitors' activities. D. obtaining bids for various marketing activities.

A Using the percentage-of-sales method. A budget is an estimate of income and expense for a specific time. A budget helps a business monitor and control its marketing expenses. Businesses consider many factors when setting their marketing budgets—economic conditions, competitors' activities, industry standings, and their own sales histories. Some businesses set their marketing budgets on the basis of sales per unit they sold or sales dollars they generated during a previous timeframe, which is the percentage-of-sales budgeting method. When a business uses the task method to set its marketing budget, it considers all of the internal and external costs associated with the specific marketing activities that it wants to do, which often involves obtaining bids or estimates from vendors that will carry out the activities

25. By setting marketing objectives, businesses are specifying A. what they want to achieve. C. what price they plan to charge. B. how they intend to make a profit. D. how they intend to advertise.

A What they want to achieve. Marketing objectives are the goals a business seeks to reach with its marketing plan. The objectives specify what the business wants to achieve, such as a 5% increase in market share during the next 12 months. Once a business sets its marketing objectives, it develops specific strategies, or plans of action, for achieving the objectives. Marketing objectives do not specify how businesses intend to make a profit, what price they plan to charge, or how they intend to advertise. These factors might be the basis of marketing strategies.

2. Marketers determine distribution intensity so they can achieve A. ideal market exposure. C. perfect market balance. B. complete market coverage. D. total market saturation.

A. Ideal market exposure. Marketers determine distribution intensity so they can achieve ideal market exposure—that is, they want to make their product available to each and every customer who might buy it, but they don't want to over-distribute the product and waste money. This condition is not known as complete market coverage or total market saturation—ideal market exposure often does not cover an entire market. It is also not referred to as perfect market balance.

49. Which of the following is an appropriate selling price for a product with total costs of $10.00 and a gross margin of $5.00: A. $7.50 C. $10.00 B. $15.00 D. $5.00

B $15.00. The selling price of a product should cover the costs of the product as well as providing a profit for the seller. To calculate selling price, add the total costs of the product to the desired gross margin. In this problem, selling price = $10.00 + $5.00 = $15.00

42. What is the break-even point in units for a business whose total fixed costs are $325,500, selling price per unit is $18, and variable cost per unit is $15.50? A. 120,250 C. 150,500 B. 130,200 D. 180,550

B 130,200. To calculate break-even in units, first determine the variable-cost margin by subtracting the variable cost per unit from the selling price per unit ($18.00 - $15.50 = $2.50). Next, divide the total fixed costs by the variable-cost margin to obtain break-even ($325,500 / $2.50 = 130,200).

10. Which of the following are product factors that a business considers when selecting a channel of distribution: A. Unit value, order size, and complexity C. Perishability, location, and order size B. Complexity, perishability, and unit value D. Location, unit value, and order size

B Complexity, perishability, and unit value. When a business selects a channel of distribution, it considers many factors, including the type of product that the business is selling. For example, the more complex, perishable, and expensive the product is, the more likely the business will select a short channel of distribution. Order size and location are market considerations

48. Businesses should set their selling prices at a level that will A. be lower than that of competitors. C. be equal to the cost of goods. B. cover expected markdowns and expenses. D. ensure a high percent of profit.

B Cover expected markdowns and expenses. Businesses can prevent markdowns and expenses from cutting into their net profit by setting prices that include allowances for markdowns and expenses. Setting the original selling price equal to cost would result in a loss for the business. Undercutting competitors' prices may be possible in some cases but is unwise if it reduces profits. Setting prices that will ensure a high profit may result in prices that are too high to foster sales.

35. Which of the following is an example of a business using a flexible pricing policy: A. Establishing prices that are competitive B. Lowering prices during bad economic times C. Setting prices as low as possible D. Charging prices that customers expect to pay

B Lowering prices during bad economic times. Because pricing is a tug-of-war, businesses need to be flexible and willing to adjust their prices. These adjustments can be increases or decreases, depending on the circumstances faced by the business. For example, during bad economic times, customers are cautious about how they spend their money. To attract these customers, the business may need to lower its prices. Setting prices as low as possible is often not effective because if the price is lower than expected, the customer may not buy. A competitive pricing policy involves establishing prices that are comparable to those charged by competitors. Charging prices that customers expect to pay is an example of a realistic pricing policy

7. A hairstylist cutting a client's hair is an example of a __________ distribution channel. A. producer to agent to consumer C. producer to retailer to consumer B. producer to consumer D. producer to wholesaler to consumer

B Producer to consumer. When a service provider performs an activity for a client (e.g., hairstylists), this is a direct channel of distribution. All of the other alternatives involve one or more intermediaries between the producer and the consumer. These are examples of indirect channels of distribution.

22. Forecasting sales for marketing plans is important because the forecast is used as a A. type of research. C. method of communication. B. standard of measurement. D. compilation of data.

B Standard of measurement. A sales forecast is an integral part of a marketing plan because it estimates sales revenue for a future period of time. An accurate sales forecast is important because businesses often use the forecast as a standard of measurement to evaluate the business's actual performance. Without a forecast, businesses would not be able to evaluate the results of implementing the marketing plan because there was not a specific sales goal to achieve. Businesses use research to develop a sales forecast. The forecast itself is not a method of communication. Data are compiled to develop a sales forecast.

17. Which of the following is an example of an external change that could affect a business's sales forecast: A. A new sales rep has been hired to develop the company's territory in Texas. B. The population of a town increases when a new hospital opens in the community. C. The company plans to modify its approach to mailing catalogs to customers. D. A company plans to raise prices on its products.

B The population of a town increases when a new hospital opens in the community. External changes occur outside the business, and the business has no control over these changes. Examples of external changes that may affect sales forecasts are population changes, economic changes, competitive changes, and market changes. Internal changes, on the other hand, are circumstances that occur within a business over which the business has some degree of control. Such factors would include changes in personnel, promotion, and pricing.

Which of the following is a benefit of channels of distribution: A. Producers must spend more money. B. We can more easily obtain products from all over the world. C. Retailers must spend more money. D. We spend more time looking for products we want.

B We can more easily obtain products from all over the world. Channels of distribution allow consumers, industrial users, producers, and other channel intermediaries to save time and money. They also allow us to more easily obtain products from all over the world, since we do not have to travel and search for each individual item we wish to purchase.

15. What section of the marketing plan includes information about expected results? A. Appendix C. Situation analysis B. Performance and implementation D. Desired target market

B. Performance and implementation. The performance and implementation section of a marketing plan details expected results and performance measurements. It also includes the marketing team's plans for adjustments that can be made if progress doesn't occur. The appendix contains charts, graphs, and other miscellaneous items related to the marketing plan. Situation analysis is the determination of the company's current marketing situation. Desired target market is a section that contains demographical information about the customers the company is trying to reach.

45. A business bought 144 items at $6.50 each and 120 items at $3.75 each. With a 10% off-season discount, the total cost to the business is A. $1,119.27. C. $1,247.40. B. $1,206.93. D. $1,386.00

C $1,247.40. First, calculate each of the extensions by multiplying the quantity by the unit price (144 x $6.50 = $936.00; 120 x $3.75 = $450.00). Total the extensions ($936.00 + $450.00 = $1,386.00). Compute the 10% discount by converting the discount rate from a percentage to a decimal by dropping the percent sign and moving the decimal two places to the left (10% = .10) and then multiplying the discount by the extension total ($1,386.00 x .10 = $138.60). Total cost to the business is found by subtracting the discount from the totaled extensions ($1,386.00 - $138.60 = $1,247.40).

50. Establish a selling price from the following information: cost, $8.45; operating expenses, $.50; and profit, $.80. A. $9.25 C. $9.75 B. $8.95 D. $7.15

C $9.75. The operating expenses and the profit should be added to the cost to determine the selling price ($8.45 + $.50 + $.80 = $9.75).

5. A large car manufacturer purchases materials that it will use to create parts for automobiles. The car manufacturer is a(n) A. retailer. C. industrial user. B. wholesaler. D. agent.

C Industrial user. An industrial user is a business that buys materials, services, or goods that will be used to make other goods or which will be used in the operation of the company. A retailer is a business that buys goods and sells them to the final consumer. Agents are intermediaries who assist in the sale of goods but do not take title to them. Wholesalers are intermediaries who buy goods from producers or agents and resell them to other businesses.

28. The marketing metrics that businesses select should relate directly to the __________ of the marketing plan. A. demographics C. objectives B. organization D. environment

C Objectives. The objectives of the marketing plan are the goals a business seeks to reach with its marketing plan. To determine if the goals are reached, a business selects marketing metrics to measure performance. To be effective, these metrics should relate directly to the objectives. For example, if one objective is to increase sales by 5% in six months, one metric should evaluate the results to determine if the goal was achieved. Marketing metrics do not relate directly to the organization, demographics, or environment of the marketing plan.

20. The MSV Company developed a sales forecast by considering the opinions of industry experts. This is an example of which of the following sales-forecasting methods: A. Industrial C. Qualitative B. Conditional D. Quantitative

C Qualitative. When a business considers the opinions and personal experience of others to develop its sales forecast, it is using the qualitative sales forecasting method. When the business uses quantitative sales forecasting methods, it uses numerical data to predict future sales. Conditional and industrial are not sales-forecasting methods.

1. Channel members should share an equal commitment to the product's A. name. C. quality. B. price. D. packaging.

C Quality. Channel members should share an equal commitment to the product's quality. Channels are effective only when channel members share this common goal. Channel members may not have an equal commitment to a product's price, name, or packaging.

46. What is the final cost to the business of a product priced at $40 with a 20% trade discount? A. $35 C. $22 B. $25 D. $32

D $32. A trade discount is a deduction from the list price of goods for performing certain marketing activities. The cost to the purchaser is calculated by multiplying the percent of trade discount by the price and then subtracting the discount amount from the price ($40 x 20% or .20 = $8; $40 - $8 = $32).

43. Clyde rented an ice-cream truck in order to earn money for college in the fall. His truck rental is $200 per week and has a yearly license fee of $52. It costs him $200 for 500 ice-cream bars that he plans to sell for $1.10 each. How many ice-cream bars must Clyde sell each week in order to reach the break-even point? A. 360 C. 201 B. 252 D. 288

D 288. To calculate the break-even point in units, determine the weekly fixed costs. In this situation, the fixed costs include the $200 a week truck rental and the $1 a week charge for the license fee. Fixed costs are equal to $201.00 per week ($200 + [$52 ÷ 52] = $201.00). To calculate variable costs, divide the total cost of the ice-cream bars by the number of bars to be sold. Variable costs are equal to $.40 per ice-cream bar ($200 ÷ 500 = $.40). The variable cost margin is equal to the selling price minus the variable costs ($1.10 - $.40 = $.70). Divide the total fixed costs by the variable-cost margin to determine break-even point ($201.00 ÷ $.70 = 287.14 or 288). In order to make his break-even point, Clyde must sell 288 ice-cream bars per week.

3. Which of the following products would likely use an exclusive distribution pattern: A. A silk necktie C. A home-decorating magazine B. A gallon of milk D. A large piece of farm machinery

D A large piece of farm machinery. Exclusive distribution means selling a product through just one middleman in a geographic area. Marketers use this method when they need to maintain tight control over a product. This is why exclusive distribution is often used for specialty products that are technical in nature or require specialized services such as installation or repair. Examples of these products are airplanes and large machinery. Milk and magazines are examples of convenience products, which usually use intensive distribution patterns. A silk necktie is an example of a consumer shopping good, which usually uses a selective distribution pattern.

31. When do businesses usually set the marketing budget? A. Before segmenting customers C. After identifying standards B. Before analyzing markets D. After determining objectives

D After determining objectives. Businesses set the marketing budget to allocate sufficient funds to cover the cost of implementing the marketing plan. Before setting the marketing budget, they should determine the marketing objectives. Businesses need to decide what they want to accomplish before they can set aside the funds to achieve those goals. Businesses set the marketing budget after analyzing markets and segmenting customers, but before identifying standards.

9. Certain product characteristics often require a business to select intermediaries that have specific A. demands. C. limitations. B. needs. D. capabilities.

D Capabilities. Some products require special handling while moving through the distribution channel. Perishable goods, bulk items, liquids, toxic chemicals, and temperature-sensitive items all require special handling. Therefore, when producers select intermediaries, they must often consider the capabilities of intermediaries to handle such products. When several options are available, the business usually considers its specific needs rather than the intermediary's needs or demands during the channel selection process. The business is not likely to select an intermediary that has limitations, because the intermediary cannot provide the required services.

30. A primary reason for establishing a marketing budget is that it helps a business to A. reduce tax liability. C. manage depreciation. B. monitor fixed assets. D. control spending.

D Control spending. A budget is an estimate of income and expense for a specific time. By predicting income and expense for a certain time, the business can control finances and spending in many areas, including marketing. Assets are anything of value that the business owns. Depreciation is the reduction in value of goods occurring over time. Reducing tax liability is not a primary reason for setting a marketing budget.

18. Which of the following individuals would a business be most likely to ask for a prediction of next year's sales: A. Financial planner C. Accounting clerk B. Inventory specialist D. Experienced salesperson

D Experienced salesperson. Many businesses use qualitative methods of forecasting sales that are based on expert opinion and personal experience. Companies often prepare their sales forecasts by asking knowledgeable individuals, such as experienced salespeople, to state their opinions or predictions. The predictions of sales representatives are based on what they have seen happen in the past as well as on current observations of the economy or of the industry. Inventory specialists help to keep track of the goods a business has on hand. Financial planners help individuals make investments and plan for financial security. Accounting clerks help to maintain a business's routine financial records. These people usually do not have first hand information about sales that would help a business forecast next year's sales.

23. Which of the following is an example of an effective marketing objective that a business might set: A. Identify new local vendors C. Decrease the level of spending B. Hire additional salespeople D. Increase profits by 6% next year

D Increase profits by 6% next year. Marketing objectives are the goals a business seeks to reach with the marketing plan. To be effective, marketing objectives should be specific and indicate a certain time period. Increase profits by 6% next year is an effective objective because it clearly states the goal to achieve, which is a 6% increase in profits. It also includes a period of time, which is to achieve that goal next year. Once a business sets a specific objective, it can develop marketing strategies to achieve the objective. Hiring additional salespeople and identifying new local vendors might be strategies a business will develop to achieve the goal. Decreasing the level of spending is not an effective objective because it is not specific and does not state a time period.

36. When the costs of raw materials increase considerably, a business is likely to A. maintain similar profit margins as its competitors. B. implement a long-term markup pricing policy. C. continue following the same pricing strategies. D. increase the selling price of the product.

D Increase the selling price of the product. Many factors affect a product's price. When the costs of the raw materials to make a product increase, many businesses pass the increase on to the end user by charging a higher selling price. Although a business may change its pricing policies, strategies, and profit margins, these actions are dependent on many factors (e.g., economic conditions, demand) other than the costs of raw materials.

19. In which of the following situations should a business lower its sales forecast for the coming year: A. Population will increase by 5%. C. Prices of raw materials remain steady. B. Major competitor will leave the market. D. Inflation rate is expected to rise 2%.

D Inflation rate is expected to rise 2%. Changes in the economy affect sales and, thus, sales forecasting. When the economy takes a downturn for any reason, such as a 2% rise in inflation, consumers' disposable income is reduced, and sales of consumer products generally decline. A business should consider economic changes when forecasting sales and lower its expectations for the coming year if it thinks consumers will not be able to buy as much of its product as in the past. A business might consider raising its sales forecast if the population will increase by 5% or a major competitor will leave the market. The sales forecast might stay the same if the prices of raw materials remain steady.

40. One reason why the target market of a business affects its pricing is because consumers in each target market A. monitor the industry standard. C. prefer products in the growth stage. B. expect a large product mix. D. judge the value of products differently.

D Judge the value of products differently. The target market of a business affects its pricing because, even in the same market, not all customers see price from the same point of view. Some customers see low price as an indicator of low quality, while others see low price as a bargain. Or, some customers see high price as an indicator of high quality, while others see it as a poor value for the price. Therefore, businesses need to determine what price range will be accepted in their markets. Consumers in each target market do not necessarily expect a large product mix, prefer products in the growth stage, or monitor the industry standard.

24. Why is it important for businesses to include specific time frames when setting marketing goals and objectives? A. Allows the business to identify the market C. Guides the business in hiring more staff B. Helps the business predict the future D. Keeps the business focused on the goal

D Keeps the business focused on the goal. An effective marketing objective should include a specific time period. For example, achieving a 5% increase in sales this year over last year is an effective objective. The business knows that it wants to accomplish this within one year. Now, the business can focus on developing strategies and tactics to achieve the objective. If the objective is vague and doesn't set a time limit, the business does not have a clear goal. Then, it may take years to achieve the objective because the business is not focused on accomplishing it within a specific time period. Including specific time frames does not help the business predict the future, guide the business in hiring more staff, or allow the business to identify the market.

37. The price function often influences the place function by determining A. when the product is made. C. how the product is advertised. B. why the product is shipped. D. where the product is sold.

D Where the product is sold. The place function involves shipping, handling, and storing of items and determining when and where they will be available. Pricing affects the place decision by determining where the product is sold. Products with high prices usually are sold in stores that carry expensive items, while products with low prices often are sold in other types of stores, such as discounters. The price function does not influence the place function by determining why the product is shipped, how the product is advertised, or when the product is made