Chapter 13 quiz
A company will never sell a product below the production costs.
False
A shortcoming of the breakeven model is that it assumes that per-unit variable costs change at different levels of operation.
False
Breakeven calculations insure that fixed costs are covered, but do not consider variable costs
False
Breakeven calculations insure that variable costs are covered, but do not consider fixed costs.
False
In value pricing, a firm seeks to maintain pricing parity with the competition.
False
Jamara has started a home party business that hosts parties and those attending paint signs. Jamara must pay $500 a year to be a representative for Paint A Sign. In addition, Jamara buys all the materials for the parties, including the metal base, the paints, brushes, stencils, and transfers. Currently, these items all add up to $10 on average. Jamara charges each participant $25 for each sign they make. For Jamara's Paint A Sign business, the $10 cost of materials is a variable cost. This cost per unit will never change.
False
Often there are cost efficiencies with longer production runs that will result in lower variable cost per unit.
False
Prestige pricing is a common approach for fast food restaurants.
False
Temporary price cuts are the only tactic available for increasing a product's market share.
False
The basic breakeven model addresses the question of whether customers will actually purchase the product at the specified price in the quantity required to break even or make a profit.
False
The price of products only includes the costs incurred by the manufacturer for procuring the raw material and for processing the products.
False
While variable costs change with level of production, they always stay the same per unit regardless of the level of production. For example, if the variables cost of making an item are $10 when producing 100 units, they will stay $10 each when 500 or 1000 units are produced.
False
When firms have identical or very similar products and price information readily available - for example, cigarettes or soft drinks - a common pricing approach to avoid price wars is utilizing a competitive parity pricing strategy.
True
A company might sell a product below the production costs for short-term promotional purposes.
True
A price is the amount of funds required to purchase a good or service.
True
Breakeven analysis is an effective tool for marketers in assessing the sales required for covering costs and achieving specified profit levels.
True
Breakeven calculations insure that both fixed and variable costs and are covered.
True
Businesses that use cost-based pricing often have different markup percentage for different types of products.
True
Many firms attempt to promote stable prices by meeting competitors' prices and competing for market share by focusing on the overall value.
True
Overall organizational objectives and more specific marketing objectives guide the development of pricing objectives, which in turn lead to the development and implementation of more specific pricing policies and procedures.
True
Prestige objectives reflect marketers' recognition of the role of price in creating an overall image of the firm and its product offerings
True
Prestige pricing establishes a relatively high price to develop and maintain an image of quality and exclusiveness that appeals to status-conscious consumers.
True
The breakeven model assumes per-unit variable costs do not change at different levels of operation. In reality, per-unit variable costs often go down as production quantities increase.
True
The breakeven point is the point at which total revenue equals total cost.
True
Value pricing is a common approach for fast food restaurants
True