MTG 393 Exam 2

1 13. Which of the following is NOT true regarding a neighborhood business district (NBD)? a. It is located at a major artery of a residential area. b. It is developed around a major department store. c. Its major retailer is either a supermarket or a variety store. d. It is developed to satisfy the convenience-oriented shopping needs of a neighborhood. e. It generally contains several small stores.

B

1 13. _____ is NOT used in the merchandise budget to derive the planned purchases at retail figure. a. Planned BOM inventory b. Planned net worth c. Planned sales d. Planned EOM inventory e. Planned retail reductions

B

1 13. _____ is the dollar amount that a buyer can currently spend on merchandise without exceeding a planned dollar stock level. a. "Planning monies" b. Open-to-buy c. Inventory shortage funds d. Unlimited funds e. EOM shortfall funds

B

1 14. Retailers frequently use _____ for short-term loans to fund working-capital requirements. a. commercial banks b. factors c. e-tailing brokers d. stock and commodity exchanges e. venture-capital firms

B

1 3. If a merchandise line has a gross margin of 35 percent and sales per dollar of inventory investment of 4.0, what is its GMROI? a. $ 2.60 b. $ 1.40 c. $ 6.15 d. $11.43 e. $14.00

B

1 8. A secondary business district (SBD) is a shopping area that evolves to satisfy the convenience-oriented shopping needs of the trading area; such locations usually have a supermarket as their anchor store.

F

1 8. A stock-to-sales ratio represents the amount of stock a retailer needs to have on hand at the end of the month compared to the sales recorded during the month.

F

1 9. Agents and brokers are two types of primary channel institutions.

F

1 18. The term "palming off" refers to when a retailer sells "gray market" products.

F

1 45. A advantage of the cost method of inventory valuation is that it is difficult to cost out each sale.

F

1 49. Since 1995, slotting fees are illegal in the United States.

F

1 50. A disadvantage of the retail method is that accounting statements can be prepared at anytime without having to conduct physical inventories.

F

1 8. Manufacturers and retailers, but not wholesalers, are primary marketing institutions.

F

1 17. The three most common defenses available to suppliers charged with price discrimination are: a. changing market conditions, meeting competition, and good faith actions. b. ignorance of law, unprofitability of the supplier, and cost justification. c. cost justification, changing market conditions, and meeting competition. d. unprofitability of supplier, cost justification, and meeting competition. e. changing market conditions, meeting competition, and ignorance of law.

C

1 1. _____ is the planning and control of the buying and selling of goods and services, to help the retailer realize its objectives. a. Retailing b. Retail reduction analysis c. Merchandising d. Forecasting e. Store management

C

1 10. There are three types of primary marketing institutions: manufacturers, retailers and: a. transporters. b. agents/brokers. c. wholesalers. d. advertisers. e. warehouses.

C

1 10. Your boss indicates that the store's stock/sales ratio is 5:1. This means that _____ should be invested in inventory for every $1 of forecasted sales. a. $.20 (at retail price) b. $5 (at cost price) c. $5 (at retail price) d. $.20 (at cost price) e. $50 (at cost price)

C

1 11. If the planned sales for the month are $70,000, the merchandise budget calls for a planned stock-to-sales ratio of 2.3, and the financial leverage is 1.1, then the planned BOM inventory should be: a. $77,000 b. $84,000 c. $161,000 d. $177,100 e. $194,100

C

1 11. _____ price fixing occurs when a retailer collaborates with the manufacturer or wholesaler to resell an item at an agreed upon price. a. Deceptive b. Horizontal c. Vertical d. Negotiated e. Coordinated

C

1 14. _____ occurs when two retailers buy an identical amount of "like grade and quality" merchandise from the same supplier but pay different prices. a. Horizontal price fixing b. Vertical price fixing c. Price discrimination d. Deceptive pricing e. Predatory pricing

C

1 15. _____ stores are stores in a shopping center that are most dominant and are expected to draw customers to the shopping center. a. Gravitational b. Power c. Anchor d. Mega e. Critical mass

C

1 17. A(n) ______occurs when the manufacturers sell their goods directly to the final consumer. a. supply chain width b. selective distribution channel c. direct supply chain d. exclusive distribution channel e. indirect supply chain

C

1 38. The three concepts of interorganizational management that a retail executive needs to understand are dependency, _____, and conflict. a. trouble-shooting b. interorganizational transfers c. power d. chain of command e. personalities

C

1 39. Current liabilities include all of the following EXCEPT: a. notes payable within the six months. b. payroll payable. c. mortgage payable. d. accounts payable. e. taxes payable.

C

1 4. The retailer's first step in developing a cost-effective way for a retailer to reach its customer with either a traditional store or virtual store is: a. establish its budget. b. identify its strengths and weaknesses. c. identify its target market. d. develop a list of constraining factors. e. hire a real-estate consultant.

C

1 40. Which of the following is NOT a major market supply factor? a. Square feet per store b. Quality of competition c. Gross margins maintained by existing competition d. Growth in stores e. Square feet per employee

C

1 40. Which of the following statements about dual distribution is incorrect? a. It may have an adverse effect on manufacturer-retailer relationships. b. It can take place when a manufacturer opens it own retail store in a market area when it feels that the current retailers handling the product line are not doing an adequate job. c. All dual distribution arrangements are illegal. d. It is legal for a manufacturer to manage a corporately owned vertical marketing system that competes with independent retailers that the manufacturer also supplies. e. It occurs when a manufacturer sells to independent retailers and also through its own retail outlets.

C

1 41. A _____ is based on the total amount purchased during a single purchasing event. a. single purchase discount b. cumulative discount c. noncumulative discount d. one-time discount e. functional discount

C

1 44. A cash discount is quoted to a retailer as 3/10, net 60. This means that: a. a discount of 3 percent can be earned if paid off in 10 installments over the next 60 days. b. the retailer will get a 10 percent discount if the total is paid in 60 days. c. a 3 percent discount will be granted to the retailer if the bill is paid in 10 days. d. the bill is due in 60 days, but a discount of 3 percent to 10 percent can be earned for paying it off sooner. e. the total bill must be paid within 10 days.

C

1 44. The three main sources of conflict between retailers and their suppliers are: a. power, control, and interdependency. b. perceptual incongruity, goal incompatibility, and interdependency. c. goal incompatibility, perceptual incongruity, and domain disagreement. d. power, control, and domain disagreement. e. power, interdependency, and perceptual incongruity.

C

1 45. The total cost valuation of a retailer's inventory is $75,000 and the total retail valuation is $130,000. Approximately how much of every retail sales dollar is made up of merchandise cost? a. 36.6 cents b. 42.3 cents c. 57.7 cents d. 73.3 cents e. $1.73

C

1 47. If delivery terms are FOB factory, who would be responsible for the transportation charges? a. The transportation company b. The vendor c. The buyer d. The buyer and the vendor share the expenses e. The final customer

C

1 47. _____ occurs when achieving the goals of either the supplier or the retailer would hamper the performance of the other. a. Perceptual incongruity b. Domain disagreements c. Goal incompatibility d. Gray marketing e. Dual Distribution

C

1 49. When a manufacturer quotes the same price for the same merchandise to buyers in Cleveland, Ohio; Los Angeles, California; and Orlando, Florida the manufacturer is probably quoting the retailers a _____ price. a. zone b. basing point c. FOB destination d. FOB equal e. FOB shipping point

C

1 49. When physical inventory value exceeds book inventory value a retailer is said to have: a. excess profits. b. shortages. c. overages. d. markups. e. inventory gains.

C

1 5. Which of the following figures is NOT found on a six-month merchandise budget? a. Planned sales percentage b. Planned retail purchases c. Inventory depreciation d. Planned gross margin dollars e. Planned EOM stock

C

1 50. An excess of physical inventory over book inventory is usually caused by: a. customer shoplifting. b. markdowns. c. bookkeeping errors. d. too high of markups. e. employee discounts.

C

1 50. Green River Ordinances restrict selling: a. via the Internet. b. environmentally unsafe products. c. door-to-door. d. obscene material. e. dangerous products.

C

1 51. Fashion Barn's total cost valuation of inventory is $120,000 and its total retail valuation is $300,000. The adjusted retail book inventory figure has been determined to be $250,000. Using the retail method of inventory valuation, what would be Fashion Barn's approximate closing inventory figure at cost? a. $50,000 b. $70,000 c. $100,000 d. $130,000 e. $180,000

C

1 51. _____ is an unwritten but well understood set of rules or standards of moral responsibility. a. Ethical regulations b. Explicit codes of ethics c. Implicit codes of ethics d. Moral laws e. Ethical standards

C

1 52. The final step in site selection is: a. assessing the neighboring stores. b. obtaining financing. c. construction of a pro forma return on asset model for each possible site. d. conducting an analysis of demand density. e. conducting an analysis of supply density.

C

1 52. Which of the following statements is FALSE? a. An implicit code of ethics is learned as employees become socialized into the organization and the corporate culture of the retailer b. Ethics are a set of rules for moral human behavior c. All retailers must have a written explicit code of ethics d. When buying merchandise, the retailer can face at least four ethical dilemmas; these relate to product quality, sourcing, slotting fees, and bribery e. Ethical standards can influence the retailer-employee relationship in three ways: misuse of company assets, job-switching, and employee theft

C

1 53. _____ exists when a high value is placed on the relationship between a supplier and retailer. a. Mutual trust b. Two-way communication c. Solidarity d. Category management e. Gray marketing

C

1 6. The _____ Act makes it a federal crime to defraud consumers through use of the mail. a. Sherman b. Federal Trace Commission c. Mail Fraud d. Automobile Information Disclosure e. Fair Packaging and Labeling

C

1 6. The _____ method of merchandise planning requires that, in addition to a base stock level, there will be a variable amount of inventory that will increase or decrease at the beginning of each sales period. a. base level b. base BOM contribution c. basic stock d. stock-to-sales e. average stock

C

1 7. When a retailer speaks of accessibility, within the context of reaching a target market, the retailer is referring to the: a. access of the store to handicapped persons. b. access of the store to major traffic arteries. c. degree to which the retailer can target its promotional or distribution efforts to a particular market segment. d. ease with which consumers can shop the retailer's location. e. degree to which the retailer can target its pricing strategy to appeal to a particular market segment.

C

1 8. The _____ is NOT considered when calculating BOM stock using the basic stock method. a. number of months in the season b. total planned sales for the season c. number of weeks in the retailer's merchandising season d. estimated turnover rate for the season e. basic stock level needed

C

1 9. A(n) _____ depicts the amount of stock to have at the beginning of each month to support the forecasted sales for that month. a. current asset b. BOM inventory c. stock-to-sales ratio d. sales-to-stock ratio e. EOM inventory

C

1 9. When all airlines agree to set fares at the same price, they are: a. engaging in vertical price fixing. b. violating fair trade laws. c. engaging in horizontal price fixing. d. violating the Federal Trade Commission Act. e. engaging in price discrimination.

C

1 25. Items for which are frequently purchased and the consumer is not willing to spend a great deal of effort to purchase are known as: a. shopping goods. b. industrial goods. c. convenience goods. d. raw materials. e. specialty goods.

C

1 32. Assets are classified as: a. cash and noncash. b. stable and unstable. c. current and noncurrent. d. temporary and permanent. e. liquid and fixed.

C

1 11. When a retailer has a yearly turnover rate that is _____ or more times a year, the percentage variation method is most commonly used for determining planned stock levels. a. 8 b. 12 c. 4 d. 10 e. 6

E

1 12. A _____ business district is a shopping area that evolves to satisfy consumer convenience, and is located on a major artery of a residential area. a. central b. community c. secondary d. suburban e. neighborhood

E

1 13. The major facilitating institution involved in storage is the: a. private warehouse. b. in-transit warehouse. c. demand collection channel. d. contract warehouse. e. public warehouse.

E

1 15. Planned purchases at retail are $50,000 and the markup percentage is 45% of retail. What is the correct planned purchases at cost figure? a. $22,500 b. $11,111 c. $25,000 d. $77,500 e. $27,500

E

1 17. _____ centers are primarily general merchandise and convenience that range from 100,000- 350,000 square feet. They may include discount department stores, supermarkets, and home improvement stores. a. Neighborhood b. Regional c. Fashion/Specialty d. Outlet e. Community

E

1 18. The most important financial statement a retailer prepares is the: a. merchandise budget. b. sales report. c. balance sheet. d. statement of cash flow. e. income statement.

E

1 19. Intel sold Pentium III computer processing chips to Gateway Computer for $12 per chip. Four days earlier, before the announcement of the new Pentium IV computer processor, Intel sold the Pentium III to Dell Computer for $22 per chip. Intel may attempt to justify its prices with a: a. meeting competition defense. b. cost justification defense. c. preferable customer defense. d. good faith defense. e. changing market conditions defense.

E

1 21. _____occurs when a retail chain charges different prices in different geographic areas in order to eliminate competition in those areas. a. vertical price fixing b. bait-and-switch pricing c. palm-off pricing d. horizontal price fixing e. predatory pricing

E

1 22. The three dimensions of the optimal merchandise mix are: a. breadth, depth, and concentration. b. merchandise lines, breadth, and density. c. variety, density, and merchandise lines. d. breadth, consistency, and depth. e. variety, breadth, and depth.

E

1 22. What are adjustments made in the selling price due to customer dissatisfaction with the product or service performance? a. Insurance costs b. Costs of goods sold c. Goodwill d. Net sales e. Allowances

E

1 26. Usually high-prestige branded products that the consumer expressly seeks out, such as Rolex watches, are known as: a. shopping goods. b. industrial goods. c. convenience goods. d. raw materials. e. specialty goods.

E

1 27. Bait-and-switch advertising: a. is illegal for all products retailing over $10. However, under the FTC Act, bait-and-switch is legal if puffery was also included in the advertisements and the product price is under $10. b. does not apply to services. c. is a form of deceitful diversion of patronage. d. is permissible if interstate commerce is not involved. e. occurs when a product is advertised at an unrealistically low price to serve as "bait" and then the salesperson tries to "switch" the customer to a higher-priced product.

E

1 5. The _____ Act requires companies to notify the government of their intent to merge. a. Sherman b. Clayton c. Federal Trade Commission d. Robinson-Patman e. Hart-Scott-Rodino

E

1 51. Which of the following are examples of compatible businesses? a. A home improvement store and a beauty shop b. A drugstore and a restaurant c. A post office and a hair salon d. A hardware store and a fast-food restaurant e. A furniture store and a leather store specializing in recliners

E

1 52. Employee theft, which amounts to _____ per apprehension, is most prevalent in foods stores, department stores, and discount stores. a. less than $50 b. approximately $100 c. approximately $200 d. approximately $500 e. more than $800

E

1 53. For purposes of evaluating sites, the_____ is not relevant. a. Expected net profit margin b. Expected annual sales c. Expected market share d. Expected return on assets e. Expected return on equity

E

1 53. _____ occurs when customers or individuals disguised as customers steal merchandise from the retailer's store. a. Vendor collusion b. Vendor theft c. Shorting d. Employee theft e. Customer theft

E

1 16. There are actually three strategy decisions to be made when designing an efficient and competitive supply chain: supply chain length, width, and: a. convenience. b. depth. c. organization. d. type. e. control.

E

1 24. Although there are exceptions, as a general rule _____ distribution is associated with _____ goods. a. intensive; shopping b. selective; convenience c. selective; specialty d. exclusive; shopping e. exclusive; specialty

E

1 42. Which of the following questions should NOT be used to assess the quality of retail competition in a particular geographic market? a. What is their market share? b. How promotion oriented are they? c. How price oriented are they? d. How customer oriented are they? e. How long they have been in business?

E

1 5. The eight marketing functions are buying, selling, storing, transporting, information gathering, financing, risk taking, and: a. managing. b. product development. c. facilitating. d. designing. e. sorting.

E

1 1. A retailer's home page on the Internet is equivalent to a local retailer's storefront.

T

1 1. A supply chain is a set of institutions that moves goods from the point of production to the point of consumption.

T

1 1. It is important for anyone considering a career in retailing to understand merchandise management, since all retailing jobs have some contact with the firm's merchandising activities.

T

1 1. The retailer needs to understand the potential legal and ethical constraints within each country in which it does business.

T

1 10. If planned reductions for June increase by $1,000, June OTB will increase by $1,000.

T

1 10. The single factor that distinguishes business districts from shopping centers or malls is that business districts are unplanned.

T

1 10. The stock-to-sales ratio will fluctuate on a monthly basis because sales tend to fluctuate monthly.

T

1 11. Anchor stores are the stores in a shopping center that are most dominant and are expected to draw customers to the shopping center.

T

1 11. It is just as bad to have too much inventory on hand as it is to have too little.

T

1 12. "Like grade and quality" has been interpreted by the courts to mean identical physical and chemical properties.

T

1 12. A key disadvantage of a small retailer locating in a shopping center is that it may be dominated by the anchor tenant.

T

1 12. A public warehouse is a facility that stores goods for safekeeping for any owner in return for a fee, usually based upon the dollar value of merchandise stored.

T

1 12. Stock-to-sales ratios always express inventory levels at retail, not cost.

T

1 13. A common error made by retail buyers is having too much or too little basic stock on hand.

T

1 13. A retailer's beginning-of-the-month (BOM) inventory for one month is always equal to the end-of-the month (EOM) inventory for the previous month.

T

1 13. Public warehouses, trucking companies, and banks are examples of facilitating institutions.

T

1 14. Failure to identify a season's hot item(s) early enough is a common buying error.

T

1 14. Insurance firms can make it possible for retailers to have what would be otherwise risky promotions.

T

1 14. Markdowns, employee discounts, and stock shortages are all various forms of reductions.

T

1 14. Price discrimination is often justifiable, if it can be shown that there was a significant change in market conditions.

T

1 15. A community shopping center will typically offer general merchandise and convenience goods.

T

1 15. A retail chain's practice of charging different prices in different geographical areas in order to eliminate competition is known as predatory pricing.

T

1 15. Failure to let the vendor assist the buyer by adding new items or new colors to the mix is a common buying error.

T

1 15. Venture-capital firms are primarily used by retailers starting a new operation or format.

T

1 16. An indirect supply chain is a channel that results when independent channel members are added between the manufacturer and consumer.

T

1 16. Generally, predatory pricing charges are difficult to prove in federal court.

T

1 16. Shopping centers and malls account for one-half of all retail sales, excluding automotive, in the United States.

T

1 16. The three dimensions of the optimal merchandise mix include: variety, breadth, and depth.

T

1 16. Too often, inexperienced retailers believe that taking a reduction is an admission of error.

T

1 17. A freestanding retailer generally locates along major traffic arteries and does not have any adjacent retailers to share traffic.

T

1 17. A retailer's planned purchase for a particular month are equal to the retailer's planned sales reductions, and desired EOM minus the retailer's BOM for that month.

T

1 17. To collect damages under charges of deceitful diversion of patronage, a retailer must demonstrate that actual damage to its business has occurred.

T

1 18. Freestanding retailers generally experience lower rent than those operating in a central business district.

T

1 18. Supermarkets usually seek to highlight breadth in their inventories.

T

1 19. As a general rule, exclusive distribution is associated with specialty goods.

T

1 19. Depth is the average number of SKUs within each brand of the merchandise line.

T

1 2. A merchandise budget is a plan of projected sales for an upcoming season, when and how much merchandise is to be purchased, and what markups and reductions will likely occur.

T

1 2. Although traditional stores are constrained by geographic factors, a "virtual store" does not face these geographic constraints.

T

1 2. Inventory is the largest investment a retailer makes.

T

1 2. Most federal laws affecting retailing seek to "promote competition."

T

1 2. Profits sufficient for survival and growth would be difficult, if not impossible, to achieve if the retailer ignored the supply chain.

T

1 20. Net sales is gross sales less returns and allowances from customers.

T

1 20. Service retailers, such as a plumbers or house painters, may not be concerned about the convenience of their locations.

T

1 20. The goal of every channel member should be to "minimize the suboptimization" of the supply chain.

T

1 21. For most retailers, the limited amount of space in their store is a constraining factor on their optimal merchandise mix.

T

1 21. In a conventional marketing channel, every member seeks to maximize its own performance, and has little or no concern for the overall performance of the total supply chain.

T

1 21. The Federal Trade Commission's main concern with deceptive advertising is not with the intent of the advertiser, but whether the consumer was misled by the advertising.

T

1 22. Physical geography is the latitude and longitude of a specific point in physical space and its related physical characteristics.

T

1 22. There are three types of vertical marketing channels: corporate, contractual, and administered.

T

1 23. Culture is the buffer that humankind has created between itself and the raw physical environment.

T

1 23. Gross margin is the difference between net sales and cost of goods sold or the amount available to cover operating expenses and produce a profit.

T

1 23. It is common for wholesaler-sponsored voluntary groups to offer the retailer both store site and location analysis as well as assistance in designing the store layout.

T

1 23. Omitting key facts during a sales presentation is considered a type of deceptive sales practice.

T

1 23. The annual cost to retailers for carrying inventory is between 15 to 20 percent.

T

1 24. A franchise is a form of a vertical marketing channel.

T

1 24. Federal laws attempt to assure a meaningful disclosure of all credit terms, so that consumers will be able to compare various credit terms available.

T

1 24. Operating expenses are those expenses that the retailer incurs in the operation of the business, other than the cost of goods sold.

T

1 24. Thematic maps use visual techniques such as colors, shading, and lines to display cultural characteristics of physical space.

T

1 26. A GIS can help the retailer evaluate how the addition of another store in a trading area could cannibalize sales of its existing store(s).

T

1 26. Operating profit is gross margin less operating expenses.

T

1 27. An advantage of using a private label is that some manufacturers will not sell a product to certain retailers.

T

1 27. Sabriya's Hats has a gross margin of $100,000 and operating expenses of $75,000. Operating profit equals $25,000.

T

1 27. The Consumer Product Safety Act specifies the retailer's responsibilities in monitoring the safety of consumer products.

T

1 28. A retailer purchases a building next door for possible expansion; in the meantime, the retailer rents the store to others. The rent the retailer collects would be considered other income and expenses.

T

1 28. A trading area is the geographic area from which a retailer, group of retailers, or community draws its customers.

T

1 28. Administered vertical marketing channels exist when one member of the channel takes the initiative to lead the channel by applying the principles of effective interorganizational management.

T

1 28. One of a retailer's greatest assets when dealing with a vendor is the retailer's past experiences with that vendor.

T

1 28. The courts have interpreted the "foreseeability" doctrine to suggest that retailers must be careful selecting which products they will sell and how they will sell these products.

T

1 29. Buyers should always approach vendors with two important pieces of information: the vendor profitability analysis statement and the confidential vendor analysis.

T

1 29. Implied warranties are based on custom, norms, or reasonable expectations.

T

1 29. Retail gravity theory suggests there are underlying consistencies in shopping behavior that allow for mathematical analysis and prediction based on the notion or concept of gravity.

T

1 29. Retailers that are not part of a contractual channel or corporate channel will probably participate in different channels since they will need to acquire merchandise from many suppliers.

T

1 29. When comparing the financial statements of different retailers, it is important to know how each retailer treats their expenses.

T

1 3. Pricing laws influence retailers in determining what price they should pay for a product.

T

1 30. Interdependency is the major cause of the conflict found in supply chains.

T

1 30. The balance sheet identifies and quantifies the firm's assets and liabilities.

T

1 30. Two types of implied warranties are "warranties of merchantability" and "warranties of fitness."

T

1 31. If a tire retailer sells you a passenger car tire, the retailer is implying that the tire is fit for use on your passenger car.

T

1 31. Power is the ability of one channel member to influence the decisions of the other channel members.

T

1 31. The basic equation for a balance sheet is "assets minus current liabilities = net worth."

T

1 32. Current assets include cash and all other items that the retailer can easily convert into cash within a relatively short period of time (usually a year or less).

T

1 32. One limitation of retail gravitation theory is that it fails to include perceived differences between the communities in question.

T

1 32. The implied warranty of fitness for a particular purpose arises when the customer relies on the retailer to assist or make the selection of goods to serve a particular purpose, usually because the consumer is unfamiliar with the merchandise.

T

1 33. Local sales taxes can influence the outshopping behavior of consumers.

T

1 33. The retailer and vendor should seek to make negotiations a "win-win" situation.

T

1 33. When a manufacturer provides a retailer with a bonus if they exceed their expected sales of the manufacturer's products, the manufacturer is using its reward power.

T

1 34. Retail gravitational theory is less useful in defining trading areas for metropolitan areas than in rural areas.

T

1 34. Territorial restrictions may be a violation of the Sherman Antitrust Act.

T

1 34. Trade discounts are typically given by manufacturers to retailers and wholesalers to compensate them for performing certain services for the manufacturer.

T

1 35. Depreciation is necessary because most noncurrent assets have a limited useful life; the difference between the asset and depreciation is intended to provide a more realistic picture of the retailer's assets and prevent an overstatement or understatement of these assets.

T

1 35. The Sherman Antitrust Act allows manufacturers and retailers to establish territorial responsibilities that exclude all other retailers from handling the products within a given market area.

T

1 35. Trade discounts are sometimes referred to as functional discounts.

T

1 35. When a market has too many stores to yield a fair return on investment, it is said to be "overstored".

T

1 36. Dual distribution occurs when a manufacturer sells to independent retailers and also through its own retail outlets.

T

1 36. Goodwill is an intangible asset, usually based on customer loyalty.

T

1 36. The use of legitimate and coercive power tends to elicit conflict and destroy cooperation. 37. Even if the channel is well-managed, there will always be some conflict between the channel members.

T

1 37. As nonstore-based retailing continues to grow, retailers need to recognize that the index of retail saturation may become less useful.

T

1 37. Total assets equal current assets plus noncurrent assets plus goodwill.

T

1 37. Trade discounts are illegal when they do not correctly reflect the costs of the intermediaries' services.

T

1 38. A quantity discount based on the total amount purchased over a given period of time is called a cumulative-quantity discount.

T

1 38. Angelo's Paints has long-term notes payable of $30,000 and mortgage payable of $60,000. Angelo's long-term liabilities equal $90,000.

T

1 38. Population characteristics are the criteria most often used to segment markets.

T

1 38. Two-way exclusive dealing arrangements potentially violate the Clayton Act.

T

1 39. Net worth, often called owner's equity, is the difference between total assets and total liabilities.

T

1 39. The three major sources of conflict between retailers and their suppliers are: perceptual incongruity, goal incompatibility and domain disagreements.

T

1 39. Tying agreements occur when a manufacturer with a strong product or service forces the retailer to buy a weak product or service as a condition for buying the strong one.

T

1 4. External forces affecting channels cannot be completely controlled by the retailer or any other institution in the supply chain, but they need to be taken into account when retailers make decisions.

T

1 4. For a target market to be reached successfully by a retailer, the market should be measurable, accessible, and accessible.

T

1 4. It is important for the retailer to remember that the merchandise budget serves no useful purpose if it cannot be understood by all decision makers.

T

1 40. A retailer is experiencing a negative cash flow when its cash outflows exceed its cash inflows.

T

1 40. A seasonal discount is given by suppliers to retailers that purchase and take delivery of merchandise during the off-season.

T

1 40. Population density is a major component of market demand potential.

T

1 40. Zoning laws are examples of state laws that affect retailers.

T

1 41. As a general rule, most states have "unfair trade practices" laws that regulate the competitive behavior of retailers.

T

1 41. Dual distribution occurs when a manufacturer sells to independent retailers and also through its own retail outlets.

T

1 41. The purpose of the statement of cash flow is to enable a retailer to project the cash needs of the firm.

T

1 41. When deciding to enter a new market, a retailer should examine the square feet per store, square feet per employee, growth in stores, and quality of competition.

T

1 42. Domain disagreements occur when there is disagreement about which member of the marketing channel should lead the channel and make the decisions.

T

1 42. Retailers often must deal with building safety regulations that vary from state to state.

T

1 42. Site analysis consists of an evaluation of the density of demand and supply within each market.

T

1 43. Applebaum's "spotting" technique can be used to determine a retailer's trade area.

T

1 43. Extra dating allows the retailer some extra or free days before the period of payment begins.

T

1 43. Various cities have passed "Green River Ordinances" restricting door-to-door selling.

T

1 44. A retailer can grow quickly and be profitable on its income statement but still face financial problems due to an inadequate cash flow.

T

1 44. Conflict is not always negative; at times, conflict can have the benefit of reminding channel members of their interdependency on each other and may actually increase channel performance.

T

1 44. Ethics is a set of rules for moral human behavior.

T

1 44. FOB factory implies that the retailer takes title for merchandise at the manufacturer's factory.

T

1 44. Stores that sell convenience goods rather than specialty goods will usually have a smaller trade area.

T

1 45. An explicit code of ethics is written but well understood set of rules or standards of moral responsibility.

T

1 46. Channel members must work together with their partners to offer products at appropriate prices. No one will win if either partner is not honest and fair with the other or with the retail customer.

T

1 46. The cost method of inventory valuation is often used by retailers with big-ticket items and a limited number of sales per day.

T

1 46. Unethical actions may be legal.

T

1 47. By limiting the number of partners for each merchandise line, one can signal greater commitment and trust to partners, thus building stronger relationships.

T

1 47. In today's environment, even so-called "reasonable" people may disagree as to what is "right" and "wrong" behavior in certain retail situations.

T

1 47. The retailer needs to design the receiving and handling area to minimize theft as this is a high-theft area.

T

1 48. Stock overages are often due to bookkeeping errors.

T

1 48. The management of cooperative relations is facilitated by mutual trust, two-way communication, and solidarity.

T

1 48. Vendor collusion often involves both a delivery person and a retailer employee with the two splitting the profit.

T

1 49. Mutual trust occurs when both the retailer and its supplier have faith that each will be truthful and fair in their dealings with each other.

T

1 49. The last step in the retail method of inventory valuation is to convert adjusted retail book inventory to cost.

T

1 5. In terms of location, retailers can be classified as store-based and nonstore-based.

T

1 5. Storing involves breaking down heterogeneous products into more homogenous groups.

T

1 5. The basic stock method (BSM) of inventory planning is most useful when a retailer has a low turnover rate or when sales are erratic.

T

1 5. When a group of competing retailers establishes a fixed price at which to sell their merchandise, they are engaging in horizontal price fixing.

T

1 50. Approximately 30 percent of American workers have admitted stealing from their employers.

T

1 50. Bribery occurs when a retail buyer is offered an inducement, which the IRS considers to be anything with a value greater than $25, for purchasing a vendor's products.

T

1 50. The density of supply refers to the extent which retailers are concentrated in different areas of the market under question.

T

1 50. Two-way communication is a pathway for resolving disputes which allows the channel relationship to continue.

T

1 51. Because of the interdependency between the retailer and supplier, two-way communication becomes necessary to coordinate actions.

T

1 51. Customers normally avoid heavily congested shopping areas and shop elsewhere in order to minimize driving time and other difficulties.

T

1 51. Many e-tailers know not only what purchases you made from them but also what sections of their website you visited.

T

1 51. Workers and shoppers must be informed when they are being monitored.

T

1 52. Solidarity in a channel exists when a high value is placed on the relationship between a supplier and retailer.

T

1 52. The LIFO method cushions the impact of rising or falling prices by matching current costs against current revenues.

T

1 6. By using a retail reporting calendar, retailers are able to make direct comparisons to prior years.

T

1 6. Store-based retailers operate from a fixed store location that requires customers to travel to the store to view and select merchandise or services.

T

1 6. The logistics network consists of all firms that are involved in moving physical inventory from initial source to the retail store.

T

1 6. The percentage variation method (PVM) of inventory planning assumes that the percentage fluctuations in monthly stock from average stock should be half as great as the percentage fluctuations in monthly sales from average sales.

T

1 6. Vertical price fixing is also referred to as resale price maintenance or "fair trade."

T

1 7. Generally, the weeks' supply method (WSM) of inventory planning works best when used by retailers who have stable sales from week to week.

T

1 7. The Supreme Court ruled that a "rule of reason" standard should apply to fair trade agreements, weighing their anticompetitive effects against their benefits.

T

1 7. The central business district (CBD) is usually a unplanned shopping area in the center of a large city where all public transportation systems converge and shoppers can visit on their way to/from work.

T

1 7. The greatest uncontrollable variable every retailer must face is movement of holidays.

T

1 7. The key difference between a primary and a facilitating marketing institution relates to whether the member takes title of goods.

T

1 8. Dollar merchandise control over inventory purchases is frequently accomplished through a technique called open to buy.

T

1 8. Fair trade laws were considered violations of Section 1 of the Sherman Antitrust Act.

T

1 9. A neighborhood business district (NBD) generally contains several small stores, with a major retailer being either a supermarket or a variety store.

T

1 9. A stock/sales ratio of 2.5:1 suggests that a retailer should have $2.50 in inventory (at retail price) for every $1 of forecasted sales.

T

1 9. If the retailer has no purchase commitments for future delivery, then its OTB and planned purchases at retail should be equal.

T

1 9. Price discrimination occurs when two retailers buy identical amounts of "like grade and quality" merchandise from the same supplier but pay different prices.

T

1 11. Faster delivery enables the supply chain to have lower warehousing costs.

T

1 19. An income statement provides a summary of the sales and expenses for a given time period, usually monthly, quarterly, seasonally, or annually.

T

1 22. Cost of goods sold is the cost of merchandise that has been sold during the period.

T

1 24. A sell through is the percentage of the stock of a particular item from a particular vendor that sold during the merchandise season.

T

1 25. Operating expenses include rent, wages, utilities, depreciation, and insurance.

T

1 43. The number one cause of retailing bankruptcies in recent years is cash flow problems.

T

1 11. A _____ business district is smaller than a central business district (CBD) and revolves around at least one department or variety store at a major street intersection. a. secondary b. substandard c. community d. suburban e. neighborhood

A

1 12. Facilitating institutions may best be described as specialists that: a. while not taking title, still perform marketing functions for supply chain members. b. create new markets for the manufacturer. c. serve as the supply chain leaders. d. perform functions supply chain members cannot legally perform. e. eliminate conflict from the supply chain.

A

1 12. If a retailer's planned BOM inventory for April is $136,000, we can assume that the retailer's: a. EOM inventory for March was $136,000. b. planned sales for the month will exceed that amount. c. BOM inventory requirements for May will be the same. d. BOM inventory for March was also $136,000. e. planned sales for the next month will exceed that amount.

A

1 12. Inventory planning based on the weeks' supply method would be most appropriate for a _____, where inventories are planned on a weekly basis and where sales do not fluctuate substantially. a. supermarket b. furniture store c. department store d. sporting goods store e. campus bookstore

A

1 15. The difference between a retailer's planned purchases and the retailer's open-to-buy is: a. merchandise that the retailer has already ordered, but has not received. b. the discounts offered by vendors on earlier purchases. c. reductions to be taken later in the selling period. d. the difference between the BOM and EOM stock levels. e. A retailers planned purchases is always equal to the retailer's open-to-buy.

A

1 16. One of the major advantages of shopping centers is that they have: a. cooperative planning and sharing of common costs. b. cheap rents. c. flexible store hours for tenants. d. freedom to set promotion programs without concern for other tenants in the center. e. very little congestion.

A

1 16. Planned purchases at retail are computed as follows: a. planned sales plus planned reductions plus planned EOM stock minus planned BOM stock. b. planned sales minus planned reductions plus planned BOM stock plus planned EOM stock. c. planned sales plus planned reductions minus commitments for future delivery. d. planned BOM stock plus planned sales plus planned reductions minus EOM stock. e. planned sales plus planned reductions plus planned EOM stock plus planned BOM stock.

A

1 16. When doing next season's merchandise budget, the buyer's planned purchases at retail are $125,000 with a markup percentage of 40% at retail. What is the buyer's planned initial markup? a. $50,000 b. $75,000 c. $60,000 d. $96,000 e. $84,000

A

1 17. A buyer's planned sales are $80,000, planned initial markup is $60,000 and planned reductions are $7,500. What is the buyer's planned gross margin on the merchandise budget? a. $52,500 b. $72,500 c. $60,000 d. $67,500 e. $87,500

A

1 17. The following planned figures have been developed by a buyer for next month: sales = $100,000; reductions = $7,000; EOM stock = $250,000; BOM stock = $300,000; commitments for delivery during next month = $15,000. What are planned purchases and OTB for the buyer? a. $57,000; $42,000 b. $157,000; $142,000 c. $57,000; $72,000 d. $39,000; $54,000 e. $175,000; $412,000

A

1 20. Which of the following is an advantage of freestanding retailers? a. Lack of direct competition b. Nearness to population c. Cooperative planning and sharing of costs d. Heavy traffic resulting from the wide range of product offerings of other retailers in the area e. Traffic generated by anchor stores

A

1 21. Exclusive distribution: a. means only one retailer is used in the trading area. b. means that a smaller number of retailers are used to reach the target market. c. means that all possible retailers are used to reach the target market. d. is associated with the distribution of convenience goods. e. is associated with shopping goods.

A

1 21. Net sales are: a. gross sales less returns and allowances from customers. b. gross sales less cost of goods sold. c. profits less cost of goods sold. d. cost of goods sold less returns and allowances. e. gross margin plus fixed expenses.

A

1 22. Burger Blaster claims on its website that it uses only the best beef in making its burgers, unlike Burger Barn, its largest competitor. Actually, Burger Blaster and Burger Barn buy exactly the same type of beef from the same wholesaler, and Burger Blaster's management knows it. As a result of Burger Blaster's claims, Burger Barn's sales fall. Burger Blaster is probably guilty of: a. deceitful diversion of patronage. b. bait advertising. c. deceptive advertising. d. puffery. e. deceptive sales practices.

A

1 22. _____ is the buffer that people have created between themselves and the raw physical environment and includes the characteristics of the population, humanly created objects, and mobile physical structures. a. Culture b. Nationalism c. Spirit d. Logic e. Humanity

A

1 23. The _____ is a group of products that are closely related because they are intended for the same end use, are sold to the same customer group, or fall within a given price range. a. merchandise line b. merchandise product mix c. brand management d. product assortment e. unit management

A

1 23. When a retailer represents merchandise as being made by a firm other than the true manufacturer, it is said to be engaged in: a. palming off. b. product substitution. c. gray marketing. d. overt faking. e. a bait-and-switch.

A

1 24. _____ refers to the management of merchandise categories, or lines, rather than individual products, as a strategic business unit. a. Category management b. Breadth management c. Assortment management d. Brand management e. Merchandise management

A

1 25. _____ refers to the number of different lines the retailer stocks in the store. a. Variety b. Assortment c. Breadth d. Depth e. Merchandise mix

A

1 3. Ease of access refers to: a. the consumer's ability to easily and quickly find a retailer's Web site in cyberspace. b. the ease with which a consumer can return merchandise. c. the consumer's ability to gain credit. d. the consumer's ability to obtain parking. e. the amount of time between when an order is placed and when it is delivered to the customer.

A

1 3. The _____ Act establishes protection for trademarks. a. Lanham b. Hart-Scott-Rodino c. Sherman d. Clayton e. Robinson-Patman

A

1 30. Reilly's law is based on two assumptions, one of which is: a. population is a good indicator of the differences in the goods and services available in different cities. b. retail competitors are of equal size. c. the two competing cities are unequally accessible from the major road. d. smaller cities will attract shoppers from larger communities. e. price fixing occurs between retailers.

A

1 31. Vertical marketing channels are typically classified into the following three categories: a. contractual, administered, and corporate. b. cooperatives, owned, and voluntary. c. wholesaler-sponsored, retailer-sponsored, and franchised. d. vertical, horizontal, and interfaced. e. facilitating, primary, and conventional.

A

1 33. A salesperson tells a customer, "Ninety percent of the people we've sold these tires to over the past five years have gotten at least 25,000 miles of use out of them without any problems. Therefore, I can assume that you should get no less than 30,000 miles with them given the way you drive." The salesperson: a. may be creating an expressed warranty. b. is engaging in false advertising. c. could never be held responsible for the tire's longevity. d. may be creating an implied warranty of merchantability. e. is creating a warranty of title.

A

1 33. If average store profitability is high in a trading area, then the trading area is most likely to be: a. understored. b. declining. c. overstored. d. undersaturated. e. hypercompetitive.

A

1 34. TrueValue, Ace, and Handy Hardware are all examples of a(n): a. retailer-owned cooperative. b. contractual vertical marketing system. c. wholesaler-sponsored voluntary group. d. independent retailer. e. franchisee.

A

1 35. Identify the incorrect statement about an implied warranty of merchantability. a. The notion of implied warranty applies only to new merchandise. b. Every retailer selling goods makes an implied warranty of merchantability. c. By offering the goods for sale, the retailer implies that they are fit for the ordinary purpose for which such goods are typically used. d. Because of the potential legal liability that accompanies an implied warranty, many retailers will expressly disclaim at the time of sale any or all implied warranties and seek to mark a product "as is." e. Some retailers will not be able to avoid implied warranties of merchantability.

A

1 36. When the customer relies on the retailer to make a selection of goods to serve a particular purpose, it is termed a(n): a. implied warranty of fitness. b. implied warranty of service. c. implied warranty of quality. d. implied warranty of merchantability. e. implied warranty of sale.

A

1 37. A(n)_______ vertical marketing channel exists when one of the members takes the initiative to manage the channel. a. administered b. allocated c. conventional d. concentrated e. concentric

A

1 38. The growth patterns of communities include all of the following except: a. initial explosive growth. b. rapid growth. c. continuous growth. d. relatively stable growth. e. decline.

A

1 39. Nike engaged in dual distribution when it began: a. to sell through its own retail outlets as well as independent retailers. b. to sell to retailers competing with its existing retailers. c. to encourage two different distributors to serve the same retailer. d. to offer two different prices to retailers, based on volume purchased. e. to produce private label brands for the retailers currently selling Nike shoes.

A

1 39. Sun Fashions offered to display Shark Sportswear's new line of swimwear at the entrance of its store if Shark pays 50 percent of the advertising expenses for Sun Fashions' Spring/Summer Catalog. Sun Fashions is employing which type of power? a. Reward power b. Traffic power c. Referent power d. Legitimate power e. Expertise power

A

1 40. When a retailer makes a single purchase of 25 or more cases of wine, the vendor offers an extra 20 percent discount. This is an example of a: a. noncumulative-quantity discount. b. promotional allowance. c. cash discount. d. functional discount. e. cumulative-quantity discount.

A

1 42. A _____ discount is one that a vendor provides a retailer for running a special promotion for a manufacturer. a. promotional b. advertising rebate c. psychological d. special e. cash

A

1 42. An example of coercive power is a manufacturer's: a. refusal to sell merchandise to any retailer who sells to diverters. b. offer to increase the cash discounts if the retailer meets a sales quota. c. offer a co-op promotional plan to all retailers in a key city. d. payment for a prominent display area in a retailer's store. e. act of sending the retailer a Christmas card without a year-end bonus.

A

1 42. As a rule, truly one-way exclusive dealing arrangements between vendors and retailers are: a. legal. b. illegal. c. illegal only if they involve a chain store. d. legal in every state but Minnesota. e. illegal if they involve a weak manufacturer.

A

1 43. Ten days before Halloween, your local candy wholesaler puts all of its Halloween candy on sale. This is an example of which type of discount? a. Seasonal discount b. Quantity discount c. Zone pricing d. Promotional allowance e. Smart discount, since Valentine's Day is approaching and the wholesaler does not want to be stuck with the merchandise

A

1 45. A buyer is given cash discount terms of 3/10, net 30, MOM. The invoice for the goods is dated May 14. When will the discount period expire? a. May 25 b. May 22 c. June 10 d. June 15 e. June 30

A

1 47. Which of the following laws prohibit retailers from operating in certain locations and require building and sign specifications to be met? a. Zoning laws b. Franchise laws c. Blue laws d. Taxing laws e. Canon laws

A

1 49. _____ restrict the sale of certain products on Sundays. a. Blue laws b. Unfair trade practices c. Fair trade laws d. Sabbath codes e. Shut out laws

A

1 50. The dominant behavior in successful supply chains is: a. collaboration. b. free-riding. c. coercive power. d. conflict resolution. e. solidarity.

A

1 50. _____ occurs when an employee of one of the retailer's vendors steals merchandise as it is delivered to the retailer. a. Vendor collusion b. Vendor theft c. Shorting d. Employee theft e. Employee shortage

A

1 53. Which of the following is NOT an ethical dilemma that a retailer faces when buying merchandise? a. The manufacturer's country of origin b. Whether to accept a slotting fee c. The issue of product quality d. The source of the merchandise e. Whether to use or accept a bribe

A

1 6. Each of the following is a marketing function that retailers perform EXCEPT: a. pricing. b. information gathering. c. selling. d. financing. e. storing.

A

1 6. _____ data is the most commonly available objective data that a retailer can obtain about a target market(s). a. Demographic b. Psychographic c. Biological d. Geographic e. Personality

A

1 8. Once planned sales have been determined, the next step when developing a merchandise budget is to determine: a. planned monthly BOM/EOM inventories. b. the buyer's planned monthly gross margin. c. planned monthly retail reductions. d. total planned sales for the season. e. planned purchases at retail and cost.

A

1 9. A _____ business district usually consists of an unplanned shopping area around the geographic point at which all public transportation systems converge; it is usually in the center of the city and often where the city originated historically. a. central b. convenient c. secondary d. suburban e. neighborhood

A

1 9. The major difference between primary marketing institutions and facilitating marketing institutions is that facilitating members: a. do not take title to the goods. b. are paid only a percentage of profits made. c. take title to the goods. d. perform all eight functions in all channels situations. e. are always paid by the manufacturer.

A

1 3. _____ is (are) the difference between net sales and cost of goods sold. a. Gross margin b. Gross sales c. Operating profit d. Net profit e. Operating margin

A

1 45. _____ occurs when the retailer and supplier have different perceptions of reality. a. Perceptual incongruity b. Domain disagreements c. Goal incompatibility d. Gray marketing e. Dual distribution

A

1 8. Marketing institutions are classified into two categories: a. those that take title to the goods and those that do not. b. those that are paid a flat fee and those that work on commission. c. those that take possession and those that do not. d. those that are profitable and those that are not. e. those with high margin and those with low margin.

A

1. The Clayton Act: a. adds to the Sherman Act by prohibiting specific practices. b. establishes the Federal Trade Commission. c. amends the Robinson-Patman Act. d. requires large companies to notify the government of their intent to merge. e. amends Section 7 of the Celler-Kefauver Antimerger Act.

A

1 14. The following information is known for a buyer of cosmetics: Planned sales for the month $42,000 Planned EOM stock $60,000 Planned reductions $4,800 BOM inventory $72,000 Merchandise commitments for delivery $9,600 What is the cosmetic department's open-to-buy at retail? a. $10,000 b. $25,200 c. $32,400 d. $34,800 e. $38,600

B

1 15. In addition to the Robinson-Patman Act, the _____ Act addresses the legality of price discrimination. a. Trade Discrimination b. Clayton c. Federal Trade Commission d. Sherman Antitrust e. Equal Rights

B

1 16. A supplier sells two identical shipments of clothing to two different retailers at different prices. This is a clear violation of the _____ Act. a. Sherman Antitrust b. Robinson-Patman c. Federal Trade Commission d. Lanham e. Truth in Lending

B

1 18. A neighborhood shopping center generally has a primary trade area of: a. 1 mile. b. 3 miles. c. 8 miles. d. 15 miles. e. 25 miles.

B

1 18. A(n) _____ supply chain is the channel that results once independent channel members are added between the manufacturer and the consumer. a. direct b. indirect c. localized d. undiverted e. limited

B

1 18. Identify the correct statement about the changing market conditions defense which buyers and sellers use that enable some types of price discrimination to occur. a. The burden of such a defense is with the buyer. b. This defense would attempt to justify the price differential based on the danger of imminent deterioration of perishable goods. c. The seller can attempt to show that its lower price to a purchaser was made in good faith in order to meet an equally low price of a competitor, provided that this "matched price" did actually exist and was lawful itself. d. Such a defense would attempt to show that a differential in price could be accounted for on the basis of differences in cost to the seller in the manufacture, sale, or delivery arising from differences in the method or quantities involved. e. This defense would attempt to justify the price differential based on the obsolescence of seasonal goods.

B

1 19. When all possible retailers are used in a trading area, the channel strategy is termed: a. exclusive. b. intensive. c. selective. d. partial coverage. e. pull coverage.

B

1 2. A merchandise budget is a plan of: a. projected sales for an upcoming season, when and how much merchandise is to be purchased, and what segments of the market to target. b. projected sales for an upcoming season when and how much merchandise is to be purchased, and what markups and reductions will likely occur. c. projected sales for an upcoming season, when and how much merchandise is to be purchased (excluding potential markups and reductions). d. projected sales for an upcoming year, when and how much merchandise is to be purchased, and what reductions will likely occur. e. projected reductions for the upcoming season.

B

1 2. A(n) _____ is the total collection of all the pages of information on the retailer's Internet site. a. web presence b. virtual store c. on-line presence d. virtual reality e. megastore

B

1 2. Gross margin return on inventory (GMROI) equals: a. gross margin percentage / dollars invested in inventory at retail. b. (gross margin / net sales) × (net sales / average inventory at cost). c. gross margin percentage / inventory turnover rate. d. net profit margin / markdown percentage. e. (gross margin / net sales) × (net sales / average inventory at retail).

B

1 21. Geographic information systems are computerized systems that combine _____ geography with _____ geography. a. meteorological; spatial b. physical; cultural c. physical; sociological d. spatial; economic e. physical; economic

B

1 23. To determine net sales, a retailer should subtract _____ from gross sales. a. inbound freight b. returns and allowances c. goodwill d. an account receivable e. other expenses

B

1 25. Identify the first step in the retail location decision. a. Evaluation of the trading area's demand and supply density. b. Identification of the most attractive markets in which to operate. c. Evaluation of capital constraints facing the retailer. d. Evaluation of the trading area's supply related factors. e. Identification of the trading areas that should be ignored.

B

1 26. A _____ area is the geographic area from which a retailer, group of retailers, or community draws its customers. a. market b. trading c. shopping d. merchandising e. customer drawing

B

1 27. Operating profit is the difference between: a. net sales and returns and allowances. b. gross margin and operating expenses. c. gross margin and cost of goods sold. d. cost of goods sold and returns and allowances. e. gross sales and cost of goods sold.

B

1 27. Reilly's law of retail gravitation explains how: a. shopping centers attract business. b. large urbanized areas attract customers from smaller rural communities. c. retail stores attract business from mail-order customers. d. small stores can survive in a highly competitive environments. e. a retailer can determine when outshopping can be profitable.

B

1 28. Which of the following items would NOT be included on the balance sheet but would BE on the income statement? a. Noncurrent assets b. Cost of goods sold c. Current liabilities d. Net worth e. Accounts receivable

B

1 28. _____ is when the vendor allows the retailer extra time before payment is due for goods. a. FOB destination b. Extra dating c. Space reduction d. FOB factory e. Space constraints

B

1 29. A retailer pays taxes on its: a. gross margin before taxes. b. net profit before taxes. c. net sales before taxes. d. gross sales before taxes. e. operating profit before taxes.

B

1 29. Vertical marketing channels attempt to: a. increase channel effectiveness but not channel efficiency. b. minimize the suboptimization of the channel. c. increase channel efficiency while minimizing channel effectiveness. d. maximize the suboptimization of the channel. e. coordinate activities among retailers.

B

1 29. Which of the following factors is NOT a constraint on the retailer's optimal merchandise mix? a. The space available in a store b. The buyer's experience with the current product line c. The merchandise turnover rate d. The way the target market behaves e. The dollar investment available

B

1 3. The supply chain, or channel, is affected by five external forces: consumer behavior, the legal and ethical environment, the socioeconomic environment, the technological environment, and: a. the natural or physical environment. b. competitive behavior. c. personal relationships. d. channel function management. e. new government regulations.

B

1 31. The courts have interpreted this doctrine to suggest that retailers must be careful in how they sell their products. a. The substantial performance doctrine b. The foreseeability doctrine c. The doctrine of collective responsibility d. The doctrine of reasonable expectations e. The doctrine of approximation

B

1 32. _____ is NOT a common factor considered when selecting a merchandise source. a. Trade terms b. Fabric colors used c. Consumers' perception of the manufacturer's reputation d. Projected markup on the merchandise e. After-sale service from the vendor

B

1 33. An attempt by a wholesaler to preserve a market for its products by strengthening the retailers that it sells to is an example of what type of channel arrangement? a. Retailer-owned cooperative b. Wholesaler-sponsored voluntary group c. Corporate system d. Retail-sponsored marketing system e. Franchised retail program

B

1 34. _____ are amounts that customers owe the retailer for goods and services. a. Total assets b. Accounts receivable c. Current assets d. Operating expenses e. Prepaid expenses

B

1 34. _____ is a record of all purchases a retailer made last year, discounts granted by the vendors, transportation charges paid, the original markup, markdowns, and the season-ending gross margin on a vendor's merchandise. a. Vendor's financial history b. Vendor profitability analysis statement c. Vendor's blue book d. Vendor report e. Confidential vendor analysis

B

1 36. Sylvan Learning, The UPS Store, AAMCO Transmissions, H&R Block, and Lawn Doctor are examples of what kind of vertical marketing channel? a. Wholesaler-sponsored voluntary group b. Contractual channel system c. Administered system d. Retailer-owned cooperative e. Conventional marketing system

B

1 37. The effectiveness of the buyer-vendor relationship depends on the: a. final negotiated prices. b. negotiation skills of the buyer and the economic power of the firms involved. c. profitability of the line for the retailer. d. method of shipment. e. markdown money.

B

1 38. When the manufacturer offers a retailer a percentage discount in exchange for performing certain wholesaling and retailing services, the manufacturer is offering a _____ discount. a. cash rebate b. Trade c. performance incentive d. Quantity e. Cash

B

1 39. Assume that the list price of an item is $1,200 and that the chain of discounts is 40-20-10. How much would a retail buyer pay? a. $480.00 b. $518.40 c. $576.00 d. $720.00 e. $840.60

B

1 4. Which of the following external forces does NOT have a major influence on the supply chain? a. Technological environment b. Employee morale c. Legal environment d. Consumers e. Behavior of competitors

B

1 40. Manufacturers usually listen to a retailer's statements about the introduction of new products because retailers are often more knowledgeable about how their consumers will react. Manufacturers understand that retailers possess what type of power in this example? a. Legitimate b. Expertise c. Knowledge-based d. Reward e. Referent

B

1 43. A _____ agreement exists when the supplier offers the retailer the exclusive distribution of a merchandise line or product, and in return the retailer agrees not to handle competing brands. a. one-way exclusive b. two-way exclusive c. three-way exclusive d. tying e. full-line

B

1 43. Site analysis begins by evaluating the: a. traffic flow, land cost per square foot, and type of neighbor within the chosen market. b. density of demand and supply of various areas within the chosen market. c. demand density, site availability, and type of neighbors within a trading area. d. type of neighbor, traffic flow, and demand density within a trading area. e. demand density, supply density, and average sales per square feet.

B

1 43. Which of the following is an example of a cash outflow? a. Cash sales b. Taxes c. Collecting accounts receivable d. Collecting notes receivable e. Sale of stock

B

1 44. Which of the following types of retail operations would be most likely to use the cost method of inventory valuation? a. A grocery store b. A antique furniture store c. A full-line department store d. A discount department store e. A bakery

B

1 46. A retailer uses a _____ to graphically illustrate the extent to which potential demand for the retailer's goods and services is concentrated in certain census tracts, ZIP codes, or parts of the community. a. boundary density typography b. demand density map c. census tract concentration statistics d. demand analysis graphing e. neighborhood size visuals

B

1 46. Your have just calculated the cost complement. Under the retail method of inventory valuation, what do you do next? a. Determine planned sales b. Calculate reductions from retail value c. Convert adjusted retail book inventory to cost d. Determine planned purchases at cost e. Determine the cost complement's inverse

B

1 46. _____ regulate the importing and exporting activities of American firms. a. Tying agreements b. Trade agreements c. Zoning laws d. Unfair trade practices e. Blue laws

B

1 47. Holly's Arts and Crafts had a retail inventory available for sale of $700,000, while sales were $210,000, markdowns were $5,000 and discounts were $2,000. What is the ending inventory at retail? a. $490,000 b. $483,000 c. $485,000 d. $693,000 e. $695,000

B

1 48. A vendor offers a retailer "FOB shipping point" terms. This means that the retailer must pay: a. no transportation costs. b. transportation costs from the shipping point. c. all transportation costs from the vendor's factory. d. half of the transportation costs. e. only for those transportation costs incurred after the goods leave the retailer's factory.

B

1 48. The specific content of these laws varies, but usually they prohibit the retailer from seeking wrongful advantages from vendors or selling merchandise below cost with the intent of using profits from another geographic area or from cash reserves to destroy or hurt competition. a. Taxing laws b. Unfair trade practices laws c. Zoning laws d. Franchise laws e. Blue laws

B

1 49. A(n) _____ is when there is no better use for a site than the retail store that is being planned for that site. a. terminal retail location b. 100-percent location c. idealized retail site location d. measured response to retail density e. freestanding location

B

1 49. _____ occur when there is a disagreement about which member of the marketing channel should make decisions. a. Perceptual incongruity b. Domain disagreements c. Goal incompatibility d. Gray marketing e. Dual distribution

B

1 5. For a retailer to successfully reach its target market using market segmentation, three criteria must be met: the target market should be: a. measurable, precise, and be motivated to buy b. measurable, accessible, and substantial enough to be profitable c. measurable, have money, and be motivated to buy d. neglected, motivated to buy, and substantial e. financially attractive, quantifiable, and be motivated to buy

B

1 5. Which of the following is NOT a formal way of deciding inventory levels? a. Stock-to-sales ratio b. Gross margin contribution c. Basic stock d. Week's supply e. Percentage variation

B

1 52. _____ occurs when both retailer and supplier openly communicate their ideas, concerns, and plans. a. Mutual trust b. Two-way communication c. Solidarity d. Category management e. Gray marketing

B

1 6. Total planned sales for the spring-summer season for the Mort's Discount Store are $25,000,000. The planned monthly sales for March is 25 percent of total planned sales. March's planned sales are: a. $2,500,000. b. $6,250,000. c. $12,500,000. d. $15,625,000. e. $18,750,000.

B

1 7. When retailers believe that it is necessary to have a given level of inventory available at all times, they will likely use the _____ method for inventory management. a. basic trade b. basic stock c. weeks' supply d. percentage-variation e. stock-to-sales

B

1 8. The Equal Credit Opportunity Act: a. regulates the reporting and use of credit information; limits consumer liability for stolen credit cards to $50. b. prohibits discrimination in credit transactions because of gender, marital status, race, national origin, religion, age, or receipt of public assistance. c. empowers the FTC to determine rules concerning consumer warranties and provides for consumer access to means of redress, such as the "class action" suit. d. makes it a federal crime to defraud consumers through use of the mail. e. requires lenders to state the true costs of a credit transaction; established a National Commission on Consumer Finance.

B

1 22. Although there are exceptions, as a general rule _____ distribution is associated with _____ goods. a. intensive; shopping b. intensive; convenience c. selective; specialty d. selective; luxury e. selective; convenience

B

1 25. Joe's Kites is preparing an income statement. Net sales equal $175,000. Returns and allowances equal $16,000. Costs of goods sold equal $95,000. What is Joe's gross margin? a. $64,000 b. $80,000 c. $96,000 d. $159,000 e. $191,000

B

1 19. If a buyer lowers planned reductions by $7,000 for the month, this will: a. reduce planned reductions for the following month by one half that amount; $3,500. b. reduce BOM inventory by $7,000. c. lower this month's OTB by $7,000. d. raise planned purchases by $7,000 for this month. e. raise this month's OTB by $7,000.

C

1 20. Deceptive pricing occurs when retailers: a. state that their lower prices were made in good faith in order to meet an equally low price of a competitor. b. ban "fair trade" items from their store. c. advertise merchandise at an artificially low price and then try to add hidden, or extra, charges. d. tell lies about a competitor's price in an attempt to make a sale. e. sell merchandise above the manufacturer's cap.

C

1 20. Selective distribution: a. means that all possible retailers are used to reach the target market. b. means only one retailer is used in the trading area. c. means that a smaller number of retailers are used to reach the target market. d. is associated with the distribution of convenience goods. e. is identified with specialty goods.

C

1 24. All of the following EXCEPT _____ are included in the top categories for counterfeit products sold in the United States. a. video games b. apparel c. handbags d. watches e. golf clubs

C

1 24. GIS can be used by the retailer for all of the following EXCEPT: a. market selection. b. site analysis. c. analyzing the sales of competitors. d. advertising management. e. evaluation of store managers.

C

1 24. _____ is the cost of merchandise that has been sold during the period. a. Gross sales b. Operating margin c. Cost of goods sold d. Gross margin e. Net sales

C

1 26. In order for a deceptive advertising charge to hold up, it must be shown that: a. there was no intent to deceive. b. the total damage exceeded $100. c. the consumer was misled. d. the advertisement was paid for by multiple members of the channel. e. competition was heightened.

C

1 27. A supply chain in which each member is loosely aligned with the others is a(n): a. modified channel. b. unadministered channel. c. conventional marketing channel. d. corporate marketing channel. e. contractual marketing channel.

C

1 28. According to Reilly, the _____ is the breaking point at which customers would be indifferent to shopping at either of two cities. a. point of inflection b. point of gravitational pull c. point of indifference d. point of equal case e. point of saturation

C

1 29. Kansas City and Des Moines are 200 miles apart. Kansas City has a population of about 450,000, while the population of Des Moines is 200,000. Given Reilly's law, what is a possible breaking point between these two cities? a. 138 miles from Kansas City b. 138 miles from Des Moines c. 120 miles from Kansas City d. 120 miles from Des Moines e. 80 miles from Kansas City

C

1 29. Three product constraints that influence a retailer's product decisions are: a. product safety, express warranties, and implied warranties. b. product safety, trademarks, and warranties. c. product safety, product liability, and warranties. d. product liabilities, warranties, and trademarks. e. trademarks, product liabilities, product safety

C

1 30. To alleviate space constraints, some retailers become involved in: a. buying on consignment. b. negotiating new building plans. c. charging manufacturers slotting fees. d. using extra dating on bills. e. adding more shelf space.

C

1 31. When deciding on which products to stock, buyers encounter all of the following conflicts EXCEPT: a. maintaining a strong in-stock position on genuinely new items while avoiding the losers. b. maintaining a high turnover goals at the same time you are maintaining a high margin on all items in the store. c. maintaining an adequate selection for customers while not confusing them. d. maintaining space productivity and utilization while not congesting the store. e. maintaining an adequate stock of the "basic" items while still keeping money aside to capitalize on unforeseen opportunities.

C

1 32. Identify the incorrect statement about expressed warranties. a. They are the result of the interaction between the retailer and the customer. b. They may be either written into the contract or verbalized. c. They are based on custom, norms, or reasonable expectations. d. They can cover all characteristics or attributes of the merchandise or only one attribute. e. An expressed warranty can be created without the use of the words warranty or guarantee.

C

1 33. Which of the following is PROBABLY NOT an important criterion to use when selecting a merchandise source? a. Distribution-center processing time b. Consumers' perception of the manufacturer's reputation c. Interest rates charged by your bank to finance this purchase d. Reliability of delivery from the vendor e. Where the product is manufactured

C

1 34. The consensus among retail location experts is that the U.S. is currently: a. understored. b. in need of more shopping centers. c. overstored or highly saturated. d. lacking in retail growth capital. e. building too few new retail sites.

C

1 35. A(n) _____ is a type of contractual vertical marketing channel that is actually a form of licensing. a. retailer-owned cooperative b. conventional marketing channel c. franchise d. wholesaler-sponsored voluntary group e. independent retailer

C

1 36. _____ is an intangible asset, usually based on customer loyalty that a retailer pays for when buying an existing business. a. Prepaid expenses b. Cash c. Goodwill d. Inventory e. Accounts payable

C

1 37. The Magnuson-Moss Warranty Act only applies to written warranties on: a. all products. b. all products costing more than $5. c. all products costing more than $15. d. all products costing more than $50. e. all products costing more than $100.

C

1 38. Art's Appliances has accounts payable of $65,000, payroll payable of $2,750, mortgage payable of $38,500, current notes payable of $12,000, and taxes payable of $3,100. Art's current liabilities are: a. $12,000 b. $38,500 c. $82,850 d. $121,350 e. $178,900

C

1 38. Attempts by a manufacturer to limit the geographical area in which a retailer may resell its products are called _____ restrictions. a. geographical b. sales c. territorial d. tying e. physical

C

1 46. A customer visits Best Buy to learn about the different models, their features, and the usage of new digital cameras. This customer then leaves the store without purchasing the camera from Best Buy and makes the actual transaction on Amazon.com. This is an example of: a. diverting. b. gray marketing. c. free-riding. d. goal incompatibility. e. perceptual incongruity.

C

1. A _____ is defined as a set of institutions that moves goods from the point of production to the point of consumption. a. retail system b. transporter c. supply chain d. franchisee e. value chain

C

1. A(n) _____ is the introductory or first material viewers see when they access a retailer's Internet site. It is the equivalent to a retailer's store-front in the physical world. a. virtual store b. web presence c. home page d. on-line presence e. virtual reality

C

1 1. The analysis, planning, acquisition, handling, and control of the merchandise investments of a retail operation is termed: a. inventory planning. b. sales review/planning. c. product ordering. d. merchandise management. e. merchandise acquisition.

D

1 10. All of the pub owners in a small college town met and decided to charge $7.99 for a burger and beer during the school year. The pub owners may be in violation of the: a. Wheeler-Lea Act. b. Clayton Act. c. Federal Trade Commission Act. d. Sherman Antitrust Act. e. Hart-Scott-Rodino Act.

D

1 10. The _____ dollar inventory planning technique states that the percentage fluctuations in monthly stock from average stock should be half as great as the percentage fluctuations in monthly sales from average sales. a. partial stock b. stock-to-sales c. basic stock d. percentage variation e. weeks' supply

D

1 11. Which one of the following institutions involved in a supply chain would take title to the goods it is dealing with? a. Trucking company b. Insurance company c. Market researcher d. Retailer e. Public warehouse

D

1 12. Classic Jeans has informed its retailers that they must either sell its new line of jeans for $39.99 or no longer be supplied by Classic Jeans. The retailers agree to this. Classic Jeans and its retailers are involved in: a. violation of the Wheeler-Lea Act. b. horizontal price fixing. c. violation of the Lanham Act. d. vertical price fixing. e. an attempt to maximize profits.

D

1 13. Resale price maintenance is another word for: a. horizontal price fixing. b. deceitful diversion of patronage. c. dual price setting. d. fair trade. e. predatory pricing.

D

1 14. Planned purchases at retail is equal to: a. planned sales and planned reductions and BOM inventory minus planned EOM inventory. b. planned sales and planned EOM inventory minus planned reductions and BOM inventory. c. planned sales minus planned reductions, planned EOM inventory, and one-half BOM inventory. d. planned sales, planned reductions, and planned EOM inventory minus BOM inventory. e. planned sales plus planned reductions.

D

1 14. The single factor that distinguishes business districts from shopping centers/malls is that business districts: a. have a more balanced tenancy. b. tend to dictate to retailers their operating hours. c. tend to do more cooperative planning and have more sharing of common costs. d. are usually unplanned. e. have a greater diversity of retailers.

D

1 15. _____ are primarily used by retailers starting a new operation or format. a. Factors b. Merchant banks c. Stock and commodity exchanges d. Venture-capital firms e. Insurance firms

D

1 18. The following planned figures have been developed by a buyer for next month: sales = $25,000; reductions = $1,500; BOM stock = $80,000; EOM stock = $88,000; commitments already made for delivery during next month = $5,600. What are planned purchases and OTB for the buyer? a. $18,500; $12,900 b. $34,500; $40,100 c. $18,500; $24,100 d. $34,500; $28,900 e. $26,500; $18,500

D

1 19. A power center typically has an anchor ratio of: a. 30-50%. b. 40-60%. c. 50-70%. d. 75-90%. e. 90-100%.

D

1 19. An income statement: a. shows the estimated cash inflows and outflows for the period. b. gives the retailer a summary of the firm's financial position at a given point in time. c. is usually only prepared when the retailer is seeking to obtain a loan. d. provides a summary of the sales and expenses for a given time period. e. is the only financial statement that shows the retailer's retained earnings.

D

1 2. Concerning the "supply chain," which of the following statements is true? a. Supply chains are so closely associated with high prices that many retailers are dropping out of supply chains and performing the functions themselves. b. Most supply chains will disappear within the next decade, as all merchandise will soon be purchased directly from manufacturers. c. Supply chains do not aid the retailer in providing possession, form, or place utility, for the final consumer. d. Profits sufficient for survival and growth will be difficult for a retailer to achieve without being part of an efficient, effective supply chain. e. Supply chains seldom change over time.

D

1 20. A $1,000 increase in planned reductions for the month would: a. raise EOM inventory by $2,000. b. lower this month's OTB by $1,000. c. increase BOM inventory by $1,000. d. increase this month's OTB by $1,000. e. lower planned purchases by $1,000 for this month.

D

1 20. _____ is (are) the retailer's total sales including sales for cash or for credit. a. Gross margin b. Operating sales c. Return sales d. Gross sales e. Net sales

D

1 21. Which of the following is NOT a common buying error that may cause adjustments to be made to the retailer's OTB? a. Buying the wrong type of merchandise b. Buying merchandise at the wrong price levels c. Having too much or too little basic stock on hand d. Buying from very few vendors e. Failing to identify the season's hot items early enough in the season

D

1 23. Although there are exceptions, as a general rule _____ distribution is associated with _____ goods. a. intensive; shopping b. intensive; specialty c. selective; specialty d. selective; shopping e. selective; convenience

D

1 23. _____ maps enable the retailer to use visual techniques such as colors, shading, and lines to display cultural characteristics of the physical space. a. Three-dimensional b. Dymaxion c. Geographic d. Thematic e. Sociographic

D

1 25. The question of who makes the best pizza came to blows when Pizza Hut sued Papa John's over Papa John's slogan "Better ingredients, better pizza." This slogan is known as: a. overstating. b. guaranteeing. c. deceptive advertising. d. puffery. e. understating.

D

1 26. _____ are those expenses that a retailer incurs in running the business other than the cost of the merchandise. a. Total assets b. Return expenses c. Current assets d. Operating expenses e. Prepaid expenses

D

1 28. Identify the incorrect statement about the conventional marketing channel. a. It is historically predominant in the United States. b. It is a sloppy and inefficient method of conducting business. c. It fosters intense negotiations within each pair of institutions in the supply chain. d. Its members are able to divide the marketing functions among all the participants. e. It has been on the decline in the United States since the early 1950s.

D

1 30. A balance sheet can be expressed as: a. profit = sales - reductions. b. net worth = operating profit - operating expenses. c. net worth = assets - expenses. d. assets = liabilities + net worth. e. assets = sales - expenses.

D

1 30. This new law was the aftermath of a public outcry over imports of tainted toothpaste and pet food, as well as the infamous importation of lead-laden toys from Asia, especially China. a. The Consumer Protection from Unfair Trading Regulations Act b. The ADA Amendments Act c. The Emergency Economic Stabilization Act d. The Consumer Product Safety Improvements Act e. The Economic Cooperation Framework Agreement Act

D

1 32. What type of vertical marketing channel has a well established authority structure? a. Franchise system b. Contractual vertical marketing system c. Conventional marketing system d. Corporate vertical marketing systems e. Wholesaler-sponsored voluntary group

D

1 32. When there are too many stores in a community to yield a fair return on investment, a community is said to be: a. retail lacking. b. understored. c. unsaturated. d. overstored. e. oversaturated.

D

1 35. A vendor profitability analysis statement: a. is a vendor's financial statement that is made available to all retailers. b. is a schedule maintained by the retailer which shows each vendor's initial data for new lines, shipment of orders, and gross margins. c. is a retailer's financial statement used by the vendor for determining available credit limits. d. is a retailer's analysis of the profitability of the different vendors and their lines from the prior year(s). e. breaks down vendors using an A-B-C classification based on the reliability of delivery from each vendor.

D

1 37. A(n) _____ is any legitimate financial claim against the retailer's assets. a. goodwill b. asset c. account receivable d. liability e. cost of goods sold

D

1 4. All of the following are requirements for a merchandise budget EXCEPT: a. the budget should be prepared in advance of the selling season. b. the language in the budget must be easy to understand. c. the budget must plan for a relatively short period of time. d. the budget should always seek to increase the planned gross margin over the actual gross margin from the previous season. e. the budget should be flexible.

D

1 4. The Celler-Kefauver Antimerger Act: a. prohibits unfair and deceptive acts and practices regardless of whether competition is injured. b. establishes protection for trademarks. c. defines price discrimination as unlawful (subject to certain defenses) and provides the FTC with the right to establish limits on quantity discounts. d. amends Section 7 of the Clayton Act by broadening the power to prevent corporate acquisitions where the acquisition may have a substantially adverse effect on competition. e. requires large companies to notify the government of their intent to merge.

D

1 40. _____ are amounts owed to vendors for goods and services. a. Notes payable b. Payroll payable c. Mortgage payable d. Accounts payable e. Taxes payable

D

1 41. A statement of cash flow: a. lists all income and expenses for a given time period. b. involves forecasting the cash value of the retailer's inventory. c. involves forecasting the present value of accounts receivable. d. explains the changes in cash and cash equivalents from one accounting period to the next by showing all cash inflows and all cash outflows for the given time period. e. shows if the firm made money over a given time period.

D

1 41. Which of the following statements about one-way exclusive-dealing arrangements is true? a. Truly one-way arrangements are illegal. b. They occur when a supplier offers a retailer unshared distribution of merchandise if the retailer agrees to do something in return for the manufacturer. c. These agreements violate the Clayton Act if they substantially lessen competition. d. The retailer does not agree to do anything in particular for the supplier. e. They violate the Clayton Act if they tend to create a monopoly.

D

1 41. _____ is power derived from one channel member's desire to identify with their channel partner. a. Reward power b. Expertise power c. Legitimate power d. Referent power e. Coercive power

D

1 47. The extent to which retailers are concentrated in different geographic areas of a community is referred to as: a. overstorage. b. store saturation. c. supply metrics. d. supply density. e. supply leverage.

D

1 48. _____ are the dollar amount by which a physical inventory value is smaller than the value that the book inventory records indicate. a. Inventory reductions b. Discounts to cost c. Cost allocations d. Shortages e. Overages

D

1 50. When selecting a retail site, a retailer should NOT consider the site's: a. traffic flow and accessibility. b. retail competition. c. demographics. d. level of inflation. e. lease terms.

D

1 51. When comparing customer theft and employee theft, which of the following statements is false? a. Over a dozen shoppers are caught for every time an employee is caught. b. As many as 30 percent of American workers admit to stealing from their employers, even if it is only a small item. c. Employee theft amounts to over $800 per apprehension. d. The average amount of merchandise recovered from a shoplifter is over $500. e. Employee theft is most prevalent in food stores, department stores, and discount stores.

D

1 51. _____ occurs when the retailer trusts the supplier and the supplier trusts the retailer. a. Solidarity b. High dollar performance c. Coercion d. Mutual trust e. Relationship marketing

D

1 52. Which of the following is an advantage of using the retail method of inventory valuation versus the cost method? a. Physical inventories using retail prices are subject to more error b. Inventories need to be taken in order to prepare the accounting statements c. Physical inventories take long periods of time to complete d. It provides an automatic, conservative valuation of ending inventory e. Heavy reliance on bookkeeping activities

D

1 53. The _____ method of inventory record keeping allows for more "inventory profits" during inflationary periods. a. revenue b. retail c. LIFO d. FIFO e. inflationary accounting

D

1 7. Suppose last year's sales were $100,000; inflation is 3 percent and you expect your market share to increase by 6 percent. What are your projected sales for this year? a. $103,000 b. $106,000 c. $109,000 d. $109,180 e. $118,000

D

1 7. The _____ Act prevents the marketing and selling of harmful toys and dangerous products. a. Sherman b. Federal Trade Commission c. Mail Fraud d. Child Safety e. Fair Packaging and Labeling

D

1 7. _____ involves breaking down heterogeneous materials or product into more homogenous groups. a. Organizing b. Classifying c. Synthesizing d. Sorting e. Grouping

D

1 8. Which of the following is a store-based retail format? a. Street peddling b. Automated merchandising systems c. Interactive television d. A shopping mall e. The Internet

D

1 9. Determine the buyer's BOM for March, using the percentage variation method, based on the following information: planned sales for March = $200,000; total spring sales = $600,000; spring months = 4; inventory turnover = 2.5. a. $150,000 b. $240,000 c. $260,000 d. $280,000 e. $600,000

D

1 2. The Sherman Antitrust Act sought to: a. restrict the amount of imports into the United States. b. eliminate price differences among competing suppliers. c. prevent unfair or deceptive advertising and selling practices within a marketing channel. d. prevent monopolies or conspiracies that are in restraint of trade. e. establish the first Federal "Fair Trade" Agency.

D

1 26. _____ refers to the number of merchandise brands that are found in a single merchandise line. a. Choice b. Variety c. Assortment d. Breadth e. Depth

D

1 27. A(n) _____ occurs when retailers have their own products competing with the manufacturer's products for shelf space and control over display location. a. category conflict b. inventory shortage c. open-to-buy d. battle of the brands e. vendor analysis

D

1 31. The retailer's _____ is (are) considered a current asset. a. buildings b. fixtures c. equipment d. inventory e. parking lots for customer use

D

1 45. _____ is the extent to which potential demand for the retailer's goods and services is concentrated in certain census tracts, ZIP code areas, or parts of the community. a. Demand gravity b. Demand growth c. Demand concentration d. Demand density e. Demand elasticity

D

1 10. A central business district offers a retailer all of the following advantages EXCEPT: a. proximity to commercial activities. b. easy access to public transportation. c. exposure to a wide product assortment. d. variety in services and merchandise for sale. e. inexpensive parking.

E

1 28. Entertainment City advertised, in its Christmas circular, a portable compact disc player on sale for $45. Sales clerks were informed that they were to attempt to persuade customers interested in the "on-sale" CD player to purchase the higher quality, $115 model. In addition, no commission will be paid on the lower priced CD player. Entertainment City is engaged in the practice of: a. palming off. b. legal advertising. c. sale advertising. d. puffery. e. bait-and-switch advertising.

E

1 30. Identify the correct statement about quick response (QR) systems. a. They are developed by conventional channel members. b. They are also known as SKU systems. c. These systems are different despite the similar names adopted by various retail industries. d. They are designed to obtain real-time information on consumers' actions by capturing ECR data at point-of-purchase terminals. e. The information obtained is used to develop new or modified products, manage channel-wide inventory levels, and lower total channel costs.

E

1 31. _____ occurs when a resident of a community travels to another community to shop. a. Trade area shopping b. Transitory shopping c. Mobility shopping d. Impulse shopping e. Outshopping

E

1 33. The retailer's _____ is (are) NOT considered a current asset. a. cash b. inventory c. accounts receivable d. prepaid expenses e. fixtures

E

1 34. The Sports Barn sells football helmets for PeeWee football, and a customer buys one for his son. The helmet cracks in several places as the son makes a tackle during a game later that fall, leaving the boy seriously injured. The _____ makes the retailer potentially liable. a. implied warranty of correctness b. Clayton Act c. expressed warranty of merchantability d. Robinson-Patman Act e. implied warranty of merchantability

E

1 35. The _____ (IRS) is the ratio of demand for a product divided by the available supply. a. index of retail stores b. index of retail sales c. index of responsible selling d. index of retail space e. index of retail saturation

E

1 35. _____ are those items for which the retailer has already paid, but the service has not been completed. a. Total assets b. Accounts receivable c. Current assets d. Operating expenses e. Prepaid expenses

E

1 36. As a retail executive you are presented with the following index of retail saturation (IRS) numbers. As such, which of the following would be the least attractive index of retail saturation number? a. 43.17 b. 99.2 c. 71.77 d. 68.41 e. 25.31

E

1 36. The _____ provides a three-year financial summary as well as the names, titles, and negotiating points of all the vendor's sales staff. a. black book b. vendor classification book c. vendor profitability book d. buyer's guide e. confidential vendor analysis

E

1 37. Which of the following is NOT an example of a Buyer Behavior Characteristic? a. Consumer lifestyle. b. Store loyalty. c. Geographic conditions. d. Climatic conditions. e. Consumer education.

E

1 39. Which of the following is NOT a major component used by retailers to determine a market's demand potential? a. Population characteristics b. Buyer behavior characteristics c. Household income d. Population density e. Level of retail competition

E

1 4. All of the following are methods of dollar merchandise planning EXCEPT: a. stock-to-sales ratio. b. percentage variation. c. basic stock. d. week's supply. e. valuation turns.

E

1 41. When a community has a high amount of square feet per employee, it potentially indicates: a. that a low level of retail technology exists in the community. b. a low level of self-service retailing. c. a desire for more service. d. that a low level of service technology exists in the community. e. a high level of self-service retailing.

E

1 42. Which of the following is an example of a cash inflow? a. Paying for merchandise b. Rent expense c. Utilities expense d. Paying dividends e. Sale of fixed assets

E

1 43. The presence of legitimate power is most easily seen in: a. retailed-owned cooperatives. b. franchises. c. administered vertical marketing channels. d. dependency. e. contractual marketing channels.

E

1 44. A tying agreement: a. ties a retailer to multiple wholesalers. b. is an agreement whereby a retailer forces a seller to offer only their strongest products or have all its products be excluded from the retailer's store. c. ties one exclusive territory to the sale of one product. d. requires that a retailer only buy merchandise from a certain group of suppliers. e. exists when a seller with a strong product or service requires a buyer to purchase a weak product or service as a condition for buying the strong product or service.

E

1 44. Which of the following does NOT result in a larger trade area for a retail store? a. Sale of specialty products b. Higher consumer mobility c. Larger store size in terms of square feet of space d. A larger distance between competing stores e. Sale of convenience goods

E

1 45. When Taco Bell requires its franchisees to purchase all their raw materials and supplies from the franchisor in order for the franchisor to maintain quality control, it is: a. engaging in an illegal exclusive distribution agreement. b. enforcing an illegal tying agreement. c. employing a dual distribution agreement. d. violating the franchisee's right to fair trade. e. enforcing a tying agreement, which courts generally consider legal as long as there is sufficient proof that these arrangements are necessary to maintain quality control.

E

1 46. _____ allows the retailer to pay the invoice in advance of the end of the cash period and earn an extra discount. a. Advance discount b. Functional discount c. Momentum discount d. Promotional allowance e. Anticipation

E

1 48. Many retailers develop checklists for site evaluation. Which general category would NOT be found on such a list? a. Local demographics b. Traffic flow and accessibility c. Retail competition d. Site characteristics e. Identification of target markets

E

1 48. Prior to pulling its products out of Target, Tupperware made its products available in the giant retailer's stores. Independent Tupperware sales representatives complained that this had a "detrimental effect" on Tupperware parties. This was an example of: a. perceptual incongruity. b. domain disagreements. c. goal incompatibility. d. gray marketing. e. dual distribution.

E

1 1. The terms "retailing" and "merchandising" are synonymous.

F

1 10. All forms of price discrimination are illegal.

F

1 10. While they never actually take title to the goods, most agents and brokers take physical possession of the merchandise.

F

1 11. In order for price discrimination to be considered illegal, it must involve a retailer and a manufacturer operating in the same state.

F

1 11. There is no way for retailers to increase their OTB once they have met their limit.

F

1 12. A common error made by retail buyers is not buying too many trendy fashions.

F

1 13. A neighborhood shopping center typically has over 500,000 square feet in gross leaseable space.

F

1 13. The illegality of price discrimination is clear-cut and retailers no longer have to fear being discriminated against.

F

1 14. A community shopping center generally has a 30-50 percent anchor ratio.

F

1 15. Reductions should be included in a merchandise budget only when they exceed 5% of sales.

F

1 17. "Breadth" refers to the number of different merchandise lines a retailer stocks in its store.

F

1 17. As a general rule, intensive distribution is associated with shopping goods.

F

1 18. As a general rule, selective distribution is associated with convenience goods.

F

1 18. The income statement is also referred to as the balance sheet..

F

1 19. A major advantage of a freestanding location is that such locations are generally free of any zoning regulations.

F

1 19. In recent years, the practice of counterfeiting trademarked products has had very little impact on U.S. firms.

F

1 20. Some forms of deceptive advertising are considered legal.

F

1 20. The optimal merchandise mix will be the same for every store.

F

1 21. A GIS is a computerized system that combines physical and spatial geography.

F

1 21. Asha's Boats has gross sales of $300,000 and cost of goods sold of $100,000. Net sales equals $200,000.

F

1 22. A retailer selling a seasonal item would want to be 75 percent sold out at the planned out-of-stock date.

F

1 22. Bait-and-switch advertising is a form of a deceptive sales practice.

F

1 25. A GIS can help develop an optimal mix of merchandise, but is not useful in site analysis.

F

1 25. A retailer's primary consideration in choosing a vendor or merchandise source should be the projected markup of the product(s) in question.

F

1 25. Because retailers usually do not produce the goods they offer for sale, they are not responsible for the safety of these products.

F

1 25. One advantage of franchising is that the owner of a franchise must give up some freedom in making business decisions that the owner of a nonfranchised business would normally be allowed to make.

F

1 26. One disadvantage that a franchisor provides a franchisee is that by borrowing from the franchisor, the franchisee has access to a lower cost of capital.

F

1 26. Retailers are the only channel members responsible for insuring product safety and reporting unsafe products.

F

1 26. While many different vendor selection criteria are discussed in the text, a product's country of origin continues to lose importance as customers now think in terms of a global, rather than national, scale.

F

1 27. A retailer's location decision making process begins with an evaluation of supply and demand densities.

F

1 27. Most franchisors normally provide financial assistance to existing franchisees.

F

1 3. A retailer must identify its location before it decides how best to reach its target market.

F

1 3. Gross margin return on inventory (GMROI) is based on both the retailer's inventory turnover and its profit margin.

F

1 3. Most retailers have four seasons a year (1) spring (2) summer (3) fall and (4) winter.

F

1 3. Once the retailer's supply chain is developed, it should never be changed.

F

1 30. Reilly's law states that two cities attract trade from an intermediate place approximately in direct proportion to the population of the two cities and in direct proportion to the square of the distance from these two cities to the intermediate place.

F

1 30. The confidential vendor analysis lists different companies than the profitability analysis statement for the purposes of protecting supplier identity.

F

1 31. During negotiations between buyer and seller, price and discount terms are seldom negotiated, because they are set by the vendor and by law cannot be adjusted to individual buyers.

F

1 31. The point of indifference between two cities is the point at which shoppers would be just as willing to shop in either city.

F

1 32. The manufacturer is responsible for negotiating the delivery dates of the merchandise when making a purchase.

F

1 32. The more dependent the supplier is on the retailer, the less power the retailer has over the supplier.

F

1 33. Accounts receivable, notes receivable, prepaid expenses, and inventory are all types of liabilities.

F

1 33. While only written warranties are covered by state laws, many types of warranties are subject to federal laws.

F

1 34. Auto dealers that want to handle BMW's because of the cars' status is an example of expertise power.

F

1 34. Fixtures and equipment are generally considered to be current assets.

F

1 35. Only three sources of power (i.e., reward, coercive, and expertise) should be used in any channel relationship.

F

1 36. A trade discount of "list less 40-20-10," assuming that the list price is $500, would result in the retailer paying $240.00 for the item.

F

1 36. The Index of Retail Saturation (IRS) is essentially the gross profit per square foot of retail space in the marketplace for a particular line of retail trade.

F

1 37. Truly one-way arrangements are illegal.

F

1 38. Most channels operate without conflict.

F

1 39. A functional discount is a reduction in price given to retailers to compensate them for their promotional expenses.

F

1 39. The household income of a trading area is not a factor that a retailer needs to consider when analyzing market potential.

F

1 4. Horizontal price fixing violates Section 1 of the Clayton Act.

F

1 4. Service retailers can stockpile inventories in anticipation of future demand.

F

1 40. Perceptual incongruity occurs when achieving the goals of either the supplier or the retailer would hamper the performance of the other.

F

1 41. Seasonal discounts are now illegal in the United States.

F

1 42. A cash discount with the terms 2/10, net 30, means that the bill is due in full within two weeks or 10 business days in order to claim a 30 percent discount.

F

1 42. Simon's Jewelry has a total cash inflow of $100,000 and total cash outflow of $80,000. Total cash flow is negative $20,000.

F

1 43. Gray marketing is when counterfeit merchandise flows through unauthorized channels.

F

1 45. A retailer should abandon a supply chain partner at the first sign of trouble.

F

1 45. As consumer mobility increases, the size of a store's trading area will decrease.

F

1 45. The shipping arrangement whereby the vendor pays all transportation costs is called FOB shipping point.

F

1 46. As the distance between competing stores increases, the stores trading areas will decrease.

F

1 46. When using FOB destination, the vendor pays the freight and the buyer takes title at the manufacturer's factory.

F

1 47. If the ending book value inventory is greater than the ending physical inventory, a overage has occurred.

F

1 47. Neighborhoods in the United States have been found to be very heterogeneous.

F

1 48. Household income is the determining factor that results in differences between neighborhoods in the United States.

F

1 48. The only way U.S. retailers can be sure that they are not buying illegal merchandise is to inspect every manufacturing plant of all its suppliers, down to the smallest subcontractors; therefore, most American retailers have undertaken such programs, even though these programs are very expensive.

F

1 49. Demand density is the extent to which retailers are concentrated in different geographic areas of the community.

F

1 49. Employee theft averages about $300 per apprehension.

F

1 5. The first step in developing a merchandise budget is to determine the buyer's planned profit objective for the season.

F

1 51. The use of the FIFO method of inventory valuation during high inflationary periods produces lower profits on the income statement and results in lower taxes.

F

1 52. After an individual leaves one retailer to work for another, that person no longer has any ethical responsibility to the previous employer.

F

1 52. For purposes of evaluating sites, the potential return on equity is critical.

F

1 52. Theft in transit is a rarity today; thus, most retailers seldom worry about it.

F