MKTG 3650 FINAL

Assume that you are estimating the demand curve for a product using buy-response data and have collected the following via a survey: Price % Who Will Buy 5.00 1% 4.75 10% 4.50 25% 4.25 45% 4.00 60% 3.75 75% 3.50 90% Assume that research suggests that your target market consists of approximately 500,000 persons. You anticipate that each buyer will purchase an average of 1.5 units of the product. What level of demand can you expect at the $4.00 price? (round to the nearest unit). 1. 450,000 units 2. 300,000 units. 3. 60 units. 4. 750,000 units. 5. none of the above.

1. 450,000 units The estimate is found by multiplying the size of the target market (500,000) by the number of units purchased per sale (1.5 units) and by the percent who say they will buy at the $4 price (60%). The result is: 500,000 x 1.5 x .6 = 450,000 units.

Larry and Alan are college students. Last summer, to earn money for their college tuition, they operated a snack booth at Panama City Beach, Florida for 3 months. They sold soft drinks, chips, crackers, and candy bars. A month before they were planning to open, Larry found a location that rented for $400 a month and a small refrigerator unit which they rented for $50 per month. Alan found distributors for the food products as well as for the paper products that they would need. Alan also purchased a business license for $100 and bought 3-month's worth of liability insurance for $150. 20. The cups, straws, napkins, and extra sales people needed to staff the stand are all examples of: 1. Variable costs. 2. Break even points. 3. Average costs. 4. Fixed costs 5. Marginal costs.

1. Variable costs.

A retail firm that uses leader pricing is: 1. cutting the regular price on a few items with the hope of attracting customers. 2. leading the industry in pricing and encouraging its competitors to raise their prices, too. 3. selling its most popular products at higher prices. 4. raising the price of its best-selling products. 5. engaged in legal, but unethical price gouging.

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

When production stops (i.e. no units produced), ____________________becomes zero. 1. variable costs of production. 2. Total fixed costs. 3. Fixed production costs. 4. Total costs. 5. Marginal costs.

1. variable costs of production.

Cash discount terms of 2/10, net 60 on an invoice would--in effect-- amount to borrowing at an annual interest rate of about ________ percent if the buyer did not pay the invoice within the 10 days allowed. 1. 14 2. 72 3. 36 4. 18 5. 22

1. 14 If the bill is paid within 10 days, the buyer can deduct 2% from the invoiced amount. Otherwise the bill is due in 60 days. If the buyer does not pay within 10 days, he or she is essentially 'borrowing' the invoiced amount for 60 - 10 = 50 days at 2% interest. The equivalent annualized interest rate is found by finding the approximate number of 50-day periods in a year. There are 365/50 = 7.3 (round to 7). The interest rate is 7 x 2% or 14%.

In a corporate vertical marketing system, 1. A firm at one level of the channel owns the firms at the next level or owns the entire channel. 2. Distribution activities are coordinated by an agent. 3. Promotion and distribution are controlled by the strongest channel member. 4. Independent firms operate under contracts which specify how distribution and promotion will be handled. 5. None of the above is true.

1. A firm at one level of the channel owns the firms at the next level or owns the entire channel.

Which of the following retailers is most likely to be involved in a retailer cooperative? 1. A hardware store 2. A fruit and vegetable stand. 3. A toy store 4. A video rental store 5. A gourmet store featuring Thai cuisine.

1. A hardware store

The tendency for producers to employ multiple channels of distribution to reach the same target markets is called: 1. Dual distribution 2. Multiple channel distribution 3. Channel adaptation 4. Channel proliferation 5. None of the above.

1. Dual distribution

___________ occurs when a manufacturer prohibits its dealers from carrying products of its competitors. 1. Exclusive dealing 2. An exclusive territory policy 3. An intensive distribution strategy 4. A tying contract 5. None of the above.

1. Exclusive dealing

Bob lives in Alaska and is a frequent buyer of books on Internet auction sites. He is used to paying higher shipping costs than his brother who lives in Florida and who also likes to buy books on the Internet. The price differential is most likely because: 1. The seller was using zone-delivered pricing. 2. The seller was using cash discounts. 3. The rules and regulations of the Federal Trade Commission required the price differential. 4. The seller set pricing differentials based on the existence of inverse demand. 5. The current legal interpretation of the Robinson-Patman Act required the price differential.

1. The seller was using zone-delivered pricing.

Many manufacturers require that their distributors purchase a 'full line' of products as part of their contractual arrangement. Such contracts are referred to as: 1. Tying contract 2. Exclusive dealing 3. Exclusive distributorship 4. Intensive distribution arrangement 5. None of the above.

1. Tying contract

Ceramics Distributing Co. wants to keep its inventory low. Which of the following would be MOST likely to encourage customers to take over more responsibility for the storage function? 1. offering a noncumulative quantity discount 2. using zone pricing 3. offering a cash discount 4. specifying invoice terms of 2/10, net 30 5. setting a skimming price

1. offering a noncumulative quantity discount

In price determination, given a particular selling price, the break-even point is where: 1. total costs of the product equals total sales revenue from the product. 2. sales volume is maximized. 3. marginal cost equals marginal revenue. 4. profit is maximized. 5. marginal cost equals total sales.

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

Alberton's supermarket prominently displays the prices of its brands side-by-side with prices you may pay at competing grocery stores for the same brand. Albertson's hopes to induce the perception that you are getting a 'deal' to stimulate added sales. Alberston's is using:(select all answers that apply) 1. Psychological pricing. 2. Price lining. 3. Every-day low pricing. 4. Reference pricing. 5. Captive pricing.

1.,4.

Assuming the law of demand holds true for a specific demand curve, high prices are not likely to be profitable for the seller because too few units will be sold to cover the firms total fixed costs. 1. true 2.False

1.true

Burroughs-Wellcome, when deciding whether or not to lower the price for AZT, considered several issues before deciding to hold the line on its current price. BW's decision illustrates a classic case of penetration pricing based on the assumption that demand for AZT was highly price elastic. 1. True 2. False

2. False

Larry and Alan are college students. Last summer, to earn money for their college tuition, they operated a snack booth at Panama City Beach, Florida for 3 months. They sold soft drinks, chips, crackers, and candy bars. A month before they were planning to open, Larry found a location that rented for $400 a month and a small refrigerator unit which they rented for $50 per month. Alan found distributors for the food products as well as for the paper products that they would need. Alan also purchased a business license for $100 and bought 3-month's worth of liability insurance for $150. The business license, rental fees, and insurance are all examples of: 1. Marginal costs. 2. Fixed Costs. 3. Average costs. 4. Variable costs. 5. Break even points.

2. Fixed Costs.

A profit-oriented manufacturer of a consumer durable product faces a demand curve that is upward sloping to the right until extremely high prices are reached. For these latter prices, the demand curve tips over and is downward sloping. Which of the following pricing approaches is most consistent with the demand curve described? 1. Bait pricing. 2. Prestige pricing 3. Penetration pricing. 4. Experience curve pricing. 5. Average cost-pricing.

2. Prestige pricing

Which method for estimating demand curves is least appropriate for the marketer of a new product. 1. Using managerial judgement. 2. Using historical ratios. 3. Using test market data. 4. Using buy-response data.

2. Using historical ratios.

Bringing together relatively small quantities purchased from suppliers and combining these quantities into a single larger shipment for sale to a buyer is called: 1. Facilitating exchange 2. Accumulating 3. Buying and selling. 4. Assorting 5. Allocating

2. Accumulating

Aristo Industries in South Dakota makes 1,000 pies per day. The total cost per raspberry-apple pie is $3.25. Its average fixed costs equal $.75 per pie. The company has calculated that if its charges $4.25 per pie, it will realize a 30 percent profit on the total cost of each pie. What pricing method is Aristo Industries using? 1. Marginal cost pricing 2. Cost-plus pricing. 3. Expected pricing. 4. Mark-up pricing. 5. Experience curve pricing.

2. Cost-plus pricing.

The Olympics Store is the only place in Chicago where a collector of Olympic memorabilia can buy a set of eight Olympic pins priced at $300,000. (They are made of diamonds, rubies, and other precious stones). What kind of distribution coverage strategy is being used? 1. Intensive. 2. Exclusive. 3. Selective. 4. Direct. 5. Dual.

2. Exclusive.

If there is a traditional channel for consumer goods, it is: 1. From producer to retailer to consumer 2. From producer to wholesaler to retailer to consumer 3. From producer to agent to wholesaler to retailer to consumer. 4. From producer to agent to retailer to consumer 5. From producer to consumer

2. From producer to wholesaler to retailer to consumer

Which distribution channel is the manufacturer of small safes for businesses most likely to use? 1. Producer to user. 2. Producer to industrial distributor to user 3. Producer to agent to user 4. Agent to industrial distributor to user 5. None of the above.

2. Producer to industrial distributor to user Given the very large number of companies needing small safes, direct distribution is not likely. The producer will use distribution via an industrial distributor or via agents to industrial distributors.

For which of the following products would a manufacturer be most likely to offer a seasonal discount? 1. Weight-training gloves. 2. Ski parkas. 3. Aspirin. 4. Microwave ovens. 5. Forklift trucks.

2. Ski parkas.

A reduction from list price given to middlemen to get shelf space for a product is a: 1. Self allocation. 2. Slotting allowance. 3. Push money allowance. 4. Brokerage allowance. 5. Trade discount.

2. Slotting allowance.

A retailer might expect a stocking allowance: 1. for paying the supplier's invoice before the product is delivered. 2. to offset the handling costs for a new product. 3. if the manufacturer can't fill an order by the promised delivery date. 4. None of the above--stocking allowances only apply to wholesalers. 5. to pass along to retail salesclerks who aggressively sell the product.

2. to offset the handling costs for a new product.

Noncumulative quantity discounts are primarily offered by a seller in order to: 1. Avoid having to offer promotional allowances. 2. Comply with the Robinson-Patman Act. 3. Encourage larger individual orders. 4. Encourage the buyer to make all of his or her purchases from this seller over an extended period of time. 5. Give preferential treatment to certain customers.

3. Encourage larger individual orders.

A manufacturer of a very labor-intensive product wishes to employ the 'experience curve' to predict the AVC associated with various levels of cumulative production volume. Based on the first lot of 1,000 units, AVC are $12.50 per unit. You may assume that this level of AVC is attained at the point where the first 1,000 units is produced. The producer expects an experience constant or rate of about .9. The producer can expect AVC of ____________ with the third doubling (within $.10). 1. $10.13 2. $10.35 3. $9.11 4. $9.42 5. None of the above is within the specified boundaries.

3. $9.11

A manufacturer of a very labor-intensive product wishes to employ the 'experience curve' to predict the AVC associated with various levels of cumulative production volume. Based on the first lot of 1,000 units, AVC are $12.50 per unit. You may assume that this level of AVC is attained at the point where the first 1,000 units is produced. The producer expects an experience constant or rate of about .9. The experience constant or experience rate is interpreted as: 1. AVC declines by 90% with each doubling of cumulative output 2. AVC declines by 9% with each doubling of cumulative output 3. AVC declines by 10% with each doubling of cumulative output 4. AVC declines by 1% with each doubling of cumulative output 5. None of the above is correct

3. AVC declines by 10% with each doubling of cumulative output

Consumers normally pay for film and processing separately. When Eckerd Drugstores advertises one price for the cost of a roll of film and this price includes the cost of processing the film, they are using 1. Promotional pricing. 2. Bait pricing. 3. Bundled pricing. 4. Prestige pricing. 5. Flexible pricing.

3. Bundled pricing.

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using 1. Bundled pricing. 2. Price lining. 3. Captive product pricing. 4. Prestige pricing. 5. Bait pricing.

3. Captive product pricing.

The strategy of market-skimming pricing is especially suited for new products because: 1. Markets cannot be effectively segmented on an income basis. 2. Price competition is typically most important in the introductory stage of the product life cycle. 3. High initial prices can keep demand from exceeding supply. 4. Profits are more important than recouping costs. 5. All of the above are true.

3. High initial prices can keep demand from exceeding supply.

Humphrey Studio sells reproductions of European antiques. Last year sales were disappointing. The studio owner decided to increase the price of each item by about 25%. The next year there was a 20% increase in units sold. The studio apparently experienced: 1. Profit programming. 2. Expected price effects. 3. Inverse demand. 4. The law of demand. 5. None of the above.

3. Inverse demand.

When Playstation video games were introduced into the United States, they were priced at an introductory price of $299. This price was $100 lower than the Sega games. Playstation used _____ a pricing strategy to quickly gain a large share of the market. 1. Market absorption. 2. Value-set. 3. Market penetration. 4. Cost-plus. 5. Market-skimming.

3. Market penetration.

The expected price for sunscreen is in the $4 to $6 price range. The introductory price for Shade UVA Guard by Schering-Plough was $9.99 to recover its research and development costs. Schering-Plough was using a _____ strategy. 1. Market-penetration. 2. Cost-plus. 3. Market-skimming 4. Market-absorption. 5. Marginal cost.

3. Market-skimming

Which of the following pricing strategies would you suggest to a retailer that wishes to encourage price-sensitive shoppers to postpone their purchases for those products the retailer intends to place on sale until the planned time of the sale: 1. Random discounting. 2. Second market discounting 3. Periodic discounting 4. Deep discounting. 5. None of the above.

3. Periodic discounting

Which of the following is least likely to cause problems when employing historical data to estimate demands curves? 1. Competitors experimented with multiple price changes during the time frame under analysis. 2. The seller made several major changes to its promotion program during the time in question. 3. The seller introduced several new products that were considered to be category extensions during the time in question. 4. A consumer rights advocacy group mounted a major campaign against the company and its products during the time under analysis. 5. Price controls were imposed on the industry by the Federal government during the period in which the pricing data were collected.

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

When a seller attempts to employ promotion to shift the demand curve for its product to the right, such efforts represent: 1. economic diversification 2. market control 3. non-price competition 4. price competition 5. price fixing.

3. non-price competition

A retailer pays a wholesaler $24.00 for an item and then sells it with a 50 percent markup based on cost. The retailer's selling price is: 1. $32.00 2. $48.00 3. $36.00 4. $24.50 5. None of the above is correct.

3. $36.00 This problem is used to reinforce the differences between mark-up pricing based on selling price and mark-up pricing based on cost.

With which geographic pricing strategy is the seller likely to have the lowest freight charge? 1. Freight absorption pricing. 2. Zone-delivered pricing. 3. FOB mill pricing. 4. Uniform delivered pricing. 5. Geographic pricing.

3. FOB mill pricing.

In order to offset the competitive disadvantage of FOB mill pricing, Tate Marble Company in Georgia could use _____ pricing to ship its products to building contractors and furniture restorers in any part of the United States. 1. Zone-delivered. 2. Uniform delivered. 3. Freight-absorption. 4. Market-skimming. 5. Market-penetration

3. Freight-absorption.

A vertical marketing system: 1. Used to be the dominant form of distribution until the advent of the horizontal marketing system. 2. Directs that all marketing functions be performed by the wholesaler. 3. Is used to improve the channel operating efficiency and effectiveness. 4. Evolved because producers were not concerned with the needs of their middlemen. 5. Is a loosely coordinated distribution channel that allows retailer and wholesaler participants to retain their freedom.

3. Is used to improve the channel operating efficiency and effectiveness.

_____ are reductions from the list price offered to middlemen in payment for marketing functions they will perform. 1. Quantity discounts. 2. Markdowns. 3. Trade or functional discounts. 4. Cash discounts. 5. Slotting fees.

3. Trade or functional discounts.

The VMS in which a large scale wholesaler brings together or sponsors a number of independent retailers is called a: 1. Vertical wholesale system 2. Voluntary wholesale system. 3. Voluntary chain 4. Producer cooperative 5. Retailer cooperative

3. Voluntary chain

When Ed Titus decided to sell 5 acres of land, he contacted Lenora Smalley. She showed the land to a young couple who wanted to build a home on a site, explained to them about the market for land in the area, and negotiated the sales terms. She left the final decision about the sale up to Titus and the young couple. Smalley is most likely a: 1. manufacturers' agent. 2. drop shipper. 3. broker. 4. commission merchant. 5. selling agent.

3. broker.

A _____ consists of the set of people and firms involved in the transfer of title to a product as it moves from producer to ultimate consumer or business user. 1. logistics network 2. marketing channel 3. distribution channel 4. wholesale channel. 5. production channel

3. distribution channel

One of the major difficulties of zone-delivered pricing is determining zone boundaries: 1. that are equal in geographic size. 2. that have the same number of customers. 3. so as to avoid charges of illegal price discrimination. 4. such that the prices are the same for each zone. 5. that are equal in dollar sales potential.

3. so as to avoid charges of illegal price discrimination.

A manufacturer has set the initial price of its product below the product's AVC. The manufacturer assumes that the low price will be attractive to enough consumers so that market share can be acquired very rapidly. The producer further assumes that, as additional market share is attained, AVC will be reduced substantially. In fact, when total sales hit the 20,000 unit point, the producer expects AVC to drop below price. The manufacturer is most likely making use of: 1. Scale economies associated with increased manufacturing efficiency as plant capacity is approached. 2. Reliance on the likely inelastic demand that should exist for this product. 3. Reliance on a high quality, prestige image that can be expected to generate high levels of market demand. 4. Experience curve effects. 5. None of the above.

4. Experience curve effects.

Price elasticity of demand refers to the: 1. Willingness of consumers to postpone buying a particular product during periods of excess demand. 2. Range of prices for a product category offered by competing firms. 3. Willingness of consumers to buy a particular product during periods of excess supply. 4. Responsiveness of quantity demanded to price changes. 5. The effect a new competitor has on total industry sales.

4. Responsiveness of quantity demanded to price changes.

Which of the following channels for consumer goods is Avon using when it sells its products at the avon.com website? 1. Producer to agent to retailer to consumer 2. Producer to agent to wholesaler to retailer to consumer 3. Producer to retailer to consumer 4. A direct channel to consumers 5. Producer to wholesaler to retailer to consumer

4. A direct channel to consumers

A tying contract may be legal if: 1. It accompanies a refusal to deal 2. A profit-maximization pricing strategy is used 3. An exclusive dealer for a company's entire product line is prohibited from carrying competing lines. 4. A new, small company is trying to enter the market 5. The involved product is in the decline stage of the PLC

4. A new, small company is trying to enter the market

Which of the following is the major disadvantage of nearly all cost-based pricing techniques? 1. Costs are too difficult to determine for these pricing techniques to be truly effective. 2. Most cost-based pricing techniques are technically too difficult to use in actual practice. 3. Cost-based pricing techniques generally are only used by manufacturers because a manufacturer can more precisely pinpoint the exact fixed and variable costs associated with its products. 4. Cost-based pricing techniques generally fail to account for consumer demand at the prices set with such techniques.

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

Every time you buy a gallon of Golden Gallon milk, you can have your Golden Gallon milk card punched. When the card has 12 punches, your thirteenth gallon of milk is free. Golden Gallon is using a _____ discount. 1. Trade. 2. Seasonal. 3. Cash. 4. Cumulative quantity. 5. Non-cumulative quantity.

4. Cumulative quantity.

Almay's cosmetics paid one-half of the advertising cost for Gwen's Boutique to run a series of ads on the local radio station. Each of the radio ads emphasized that the boutique carried the complete line of Almay products. This would be an example of a: 1. Seasonal discount. 2. Forward dating. 3. Quantity discount. 4. Promotional allowance. 5. Cash discount.

4. Promotional allowance.

Some manufacturers give ______________ to retailers to pass on to the retailers' salesclerks to encourage aggressive selling of specific items or lines. 1. Advertising allowances. 2. Trade discounts. 3. Cash discounts. 4. Push money. 5. Slottine fees.

4. Push money.

The typical markup (percent) is the: 1. selling price minus the cost of the item, divided by the cost of the item--times 100. 2. selling price of an item, divided by its cost--times 100. 3. selling price minus the cost of the item, divided by the average fixed cost--times 100. 4. selling price minus the cost of the item, divided by the selling price--times 100. 5. cost of an item divided by its selling price--times 100.

4. selling price minus the cost of the item, divided by the selling price--times 100. The percentage markup (based on selling price) is (Price - Cost) / Price x 100

Which of the following is least likely to be a condition necessary for employing a skimming pricing strategy? 1. Strong brand preferences exist due to the product's unique characteristics 2. producer has control over a critical material needed for production of the product. 3. The product is protected by patents 4. The product is associated with a high capital investment serving as a 'barrier to competitive entry' 5. A large, highly price-elastic market exists for the product

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

A manufacturer could try to defend itself against charges of price discrimination under the Robinson-Patman Act by claiming that: 1. any price differences were to "meet competition in good faith." 2. the price differences did not injure competition. 3. the price differences were justified on the basis of cost differences. 4. the products were not of "like grade and quality." 5. All of the above are possible defenses against price discrimination charges.

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

A penetration pricing strategy is most likely to be used when pricing objectives focus on: 1. Pricing at the same level as competitors to avoid potential price wars 2. Manipulating consumers' psychological impressions of price as an indicator of product quality or status. 3. Penetration pricing cannot be used in any of the situations suggested above. 4. Maximizing profits on a per unit basis. 5. Preventing competitive entry by signaling competitors that profit potential is limited due to small or non-existent margins.

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

Wendy's fast-food restaurant chain priced several of its more popular menu items at $.99 while raising the price of some of its upgraded meal deals. This pricing strategy is an example of _____ pricing because the chain is trying to improve the customer's perception of the ratio of benefits received to the product's price. 1. Cost-plus. 2. Fair trade. 3. Penetration. 4. Psychological. 5. Value.

5. Value.

For which of the following products would a retailer be LEAST likely to use odd pricing? 1. Bic cigarette lighters. 2. chewing gum 3. reams of computer paper 4. Lean Cuisine diet meals 5. a designer evening dress

5. a designer evening dress

A tire retailer is advertising a very low price on a popular size tire. When a customer comes into the store, the clerk says the low-priced item is sold out, and tries to convince the customer to buy the top-of-the-line model--claiming the low priced model is not a very good buy even at the low price. This is an example of: 1. value in use pricing. 2. price lining. 3. leader pricing. 4. full-line pricing. 5. bait pricing.

5. bait pricing.

The Wine Cabinet, a store that features fine wines from all over the world, consistently prices The Complete Wine Course at $10.99. It sells this book at a price far below its regular retail price of $25.95 in order to attract wine shoppers to its store and increase its wine sales. This would be an example of: 1. a single-price strategy. 2. price lining. 3. penetration pricing. 4. cost-plus pricing. 5. leader pricing.

5. leader pricing.

The Horizons Cycle Shop bought 3 motorcycles for $2,100 and sold each one for $1,000. The markup percent (based on selling price)was closest to: 1. 43% 2. 130% 3. 50% 4. 33.3% 5. 30%

5. 30% Each bike costs $2,100 / 3 = $700. Each bike sells for $1,000. The dollar mark-up, therefore, is $1,000 - $700 = $300. The percent mark-up based on selling price is $300 / $1,000 x 100 = 30%.

Midway Plumbing, Inc. buys plumbing supplies, pipes, and tools from different manufacturers and resells them to construction companies. Midway is MOST LIKELY: 1. A drop shipper 2. An agent middleman 3. A rack jobber. 4. A manufacturer's agent 5. A merchant wholesaler

5. A merchant wholesaler

Ralston-Purina, with its lines of cereal, snack foods, and pet foods has such brand equity and market position that it is able to coordinate distribution activities through is market power. Its distribution illustrates a(n): 1. Voluntary Chain. 2. Franchise system. 3. Corporate VMS. 4. Contractual VMS. 5. Administered VMS.

5. Administered VMS.

Polo (Ralph Lauren) not only manufactures clothing but also operates its own retail stores (factory outlets). Polo is an example of a(n): 1. Wholesaler-sponsored voluntary chain. 2. Administered VMS. 3. Franchise system. 4. Contractual VMS. 5. Corporate VMS.

5. Corporate VMS.

A channel consisting of only producers and final customers, with no middlemen providing assistance, is called ____________ distribution. 1. Intensive 2. Administered. 3. Selective 4. Indirect 5. Direct

5. Direct

Yesterday Phoenix Press in Arizona shipped 112 books to a retailer in Tennessee, 54 books to a retailer in Florida, and 9 books to a customer in Alaska, yet Phoenix Press paid no freight charges. Which geographic pricing strategy did Phoenix use? 1. Zone-delivered pricing. 2. Uniform delivered pricing. 3. Freight absorption pricing. 4. FOB destination pricing. 5. FOB plant pricing.

5. FOB plant pricing.

Palouse Red is a small producer of red bell pepper sauce. It does not have its own sales force. Which channel of distribution is it most likely to use? 1. Producer to agent to industrial distributor to consumer. 2. Producer to industrial distributor to user 3. Producer to user. 4. Agent to industrial distributor to user. 5. Producer to agent to retailer to consumer

5. Producer to agent to retailer to consumer

For featuring Erector Sets prominently in its store window, Child's Heaven, a store that carries educational toys, received a free motorized Ferris wheel kit, valued at $50. This is an example of a: 1. Seasonal discount. 2. Cash discount. 3. Rebate. 4. Forward dating. 5. Promotional allowance.

5. Promotional allowance.

Manufacturers offer _____, deductions from a seller's list price, to encourage customers to buy in larger amounts or to make most of their purchases from that seller. 1. Seasonal discounts. 2. Trade discounts. 3. Functional discounts. 4. Promotional allowances. 5. Quantity discounts.

5. Quantity discounts.

For which of the following products is a manufacturer most likely to use intensive distribution? 1. Latex paint. 2. Mountain bikes 3. Silk flowers 4. Vacuum cleaners 5. Soft drinks

5. Soft drinks

The main difference between retailer cooperatives and voluntary chains is: 1. The types of promotion used 2. Their pricing strategies. 3. Their offensive vs. defensive postures 4. The length of the distribution channel 5. Who organizes them

5. Who organizes them

Cherokee Cable Corporation, sells heavy wire cable to large construction companies around the country. Customers pay shipping from a central warehouse in Dallas. Recently, a new competitor in Atlanta has been taking away some of Cherokee Cable's Southern customers. If Cherokee Cable wants to compete in those distant markets, but not increase the cost of its product to other customers, it would probably switch to 1. uniform delivered pricing. 2. specifying "F.O.B. Dallas" in its contracts. 3. None of the above would help Cherokee Cable Corporation with its problem. 4. zone pricing. 5. freight absorption pricing.

5. freight absorption pricing.

_________ is the ratio of perceived benefits to price and any other incurred costs. 1. Target return. 2. Utility. 3. Supply. 4. Demand. 5. Value

5. value

vSpruce Pine Mfg. Co. has total fixed costs of $300,000 a year. The owner estimates that average variable costs for its product will be about $35 next year. The selling price to wholesalers will be $50. If total industry sales are expected to be about $5,000,000 next year, what market share does Spruce Pine need to break even? (Round to the nearest 1 percent. Do not express your answer in decimal format. For example, don't use .4 to represent 40%.)

Break even for the producer in units is: BE(Q) = TFC / (P-AVC) = $300,000 / ($50 - $35) = $300,000 / $15 = 20,000 units. The break even in dollar sales is, therefore, 20,000 x $50 = $1,000,000. Since industry sales are expected to be $5,000,000, the manufacturer must obtain $1,000,000 / $5,000,000 x 100 or 20% market share to achieve break even.

Six ounces of Charlee's Gourmet Beef Jerky sell for $13.50. The fixed costs for its manufacturer totals $16,000, and each 6-ounce package of beef jerky has a variable cost of $9.50. Compute the dollar break even point. (Round your answer to the nearest dollar, include the dollar sign and any commas. Do not include any decimal places. Format should be $XX,XXX)

Finding the break even point in dollars can be done in two ways. The simplest way is to first compute break even in units and then multiply the result by the price per unit. Break even in units is given by:<br><br>BE(Q) = TFC / (P-AVC) =<br>$16,000 / ($13.50 - $9.50) =<br>$16,000 / $4.00 =<br>4,000 units<br><br>The break even point in dollars is, therefore, 4,000 units x $13.50 or $54,000.<br><br>The break even point in dollars can be found directly by dividing TFC by the percent contribution margin of ($13.50 - $9.50) / $13.50 = .2963. The break even point is: $16,000 / .2963 = $53,9999.325 or $54,000.

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

Since the bill was paid within 10 days, Ann can deduct 3% of the invoiced amount from her bill. She will pay $265 - $7.95 = $257.05.

Appstate sells bean mixes for soups. The company produces 2,000 packages per day. The total variable cost for making one bag of Mexicali bean soup is $3. The average fixed cost per bag is $.90. The company charges $6.50 per bag and earns a 40 percent profit. Calculate the break-even point in units. (round to the nearest unit)

The break even point in units is given by:<br><br>BE(Q) = TFC / (P-AVC)<br><br>Total Fixed Costs are found by multiplying the anticipated production (and sales) volume of 2,000 units by the value given for fixed costs per unit: TFC = 2,000 units x $.90 = $1,800.<br><br>BE(Q) is now found by subsituting all values into the formula:<br><br>BE(Q) = $1,800 / ($6.50 - $3.00) = $1,800 / $3.50 = 514.28 units or 514 units (rounded down). Note: In practical application, most managers would round up to the nearest unit, making the answer 515 units.

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

This is a problem in forward chain mark-up pricing. The answer is obtained by applying the mark-up based on selling price to each level in the channel: 1. Price to the wholesaler is: $35 (given). 2. Price to the retailer is: $35 / (1-.2) = $43.75 3. Price to the consumer is: $43.75 / (1-.3) = $62.50

Blue Ridge Weavers wants to set its selling price on an item so that the retail list price will be $50--taking into account the usual markups of 10 percent at wholesale and 30 percent at retail. At what price should Blue Ridge Weavers sell the item? (round to the nearest penny. Include the dollar sign).

This is an application of backward chain mark-up pricing. Start with the retail selling price of $50 and work bacward to determine the price the producer must set to the wholesaler. The price to the retailer is $50 x (1 - .30) = $35. The price to the wholesaler must, therefore, be: $35 x (1 - .1) = $31.50

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

This is an application of the break even formula in which a desired level of target profit is identified. The standard break even formula applies, with exception that the desired profit is added to the TFC in the numerator of the formula: BE(Q) = (TFC + Profit)/(Price - AVC) Applying the numbers from the problem yields: BE(Q) = ($4,500 + $10,000) / ($750 - $325) = $14,500 / $425 = 34 units (rouned down) or 35 units (rounded up).

The total fixed costs for a manufacturer of road maps is $25,000, and its unit variable cost is $3. The company sells 20,000 maps and just breaks even. What is the map's selling price? (round to the nearest penny. Include the dollar sign)

This is an application of the break even formula in which you must solve for price rather than unit sales. Solving the break even formula for price yields:<br><br>Price = (TFC / BE(Q)) + AVC<br>Price = ($25,000 / 20,000 units) + $3.00<br>Price = $1.25 + $3.00 = $4.25

High Meadow Mfg. Co. sold its product through wholesalers and retailers--allowing the wholesalers a markup of 25 percent and retailers a markup of 40 percent. If the retail selling price is $100 and the manufacturer's cost is $30, what markup in dollars did High Meadow receive on the sale of this product? (round to the nearest penny. Include the dollar sign in your answer)

This is nothing more than a slightly disguised backward chain mark-up pricing problem. Start by finding the price to the retailer: $100 x (1-.4) = $60. Next, find the price to the wholesaler: $60 x (1-.25) = $45.00. The producer's cost is $30. Therefore, the dollar mark-up must be $45.00 - $30.00 = $15.00

The rent for a booth at the flea market is $100 per month. The variable cost per hanging basket sold is $6. The selling price for each basket is $10. Calculate the break-even point in units. (round to the nearest unit)

This is the simplest possible break even problem requiring only a direct application of the break even formula: <br><br>BE(Q) = TFC / (Price - AVC) = <br>$100 / ($10 - $6) = <br>$100 / $4 = <br>25 units.

In general, there is a larger change in profits associated with a $1.00 reduction in costs than for the same $1.00 increase in revenue. This phenomenon is referred to as: a. Profit leverage of costs b. Profit leverage of revenue c. Profit elasticity of costs d. Price elasticity of demand e. Who knows?

a. Profit leverage of costs

The 'realistic competitive price range' is generally: a. Somewhere between the price floor set by unit costs and the price ceiling set by customer demand. b. Generally at the higher end of the demand curve. c. Generally at the lower end of the demand curve. d. Usually exactly in the middle of the demand curve. e. Who knows?

a. Somewhere between the price floor set by unit costs and the price ceiling set by customer demand.

Not all prices on a given demand curve will be profitable. For example, when price is set too low, demand may be very high (many units can be sold), but the contribution per unit (contribution margin per unit) may be so low that TFC cannot be covered. True or False? a. True b. False

a. True

When demand is price inelastic, TR tends to increase as price increases. This is essentially the same as stating that the percent change in demand is greater than the percent increase in price: a. True b. False

a. True

The "law of demand" is associated with: a. Demand curve in which demand increases as price increases. b. Demand decreases as price increases. c. Demand curves in which demand is only price elastic d. Demand curves in which demand is only price inelastic e. None of the above.

b. Demand decreases as price increases.

When graphing fixed costs, the resulting fixed cost curve begins at the origin and has an upward increasing slope. True or False? a. True b. False

b. False

A brand is fundamentally the same as those of its competitors with little 'value added.' In addition, the product is one such that little brand loyalty tends to exist. It is most likely that when setting prices for this brand, the seller must treat demand as price inelastic. a. True. b. False.

b. False.

A lengthy series of past data relating sales to prices is required for constructing demand curves using: a. Test market data b. Historical ratios c. Laboratory experiments d. Buy response data e. None of the above.

b. Historical ratios

As price increases, the total revenue for that product declines. This suggests that: a. Marketers have not planned very well. b. Demand for the product is extremely low. c. Demand for the product is essentially price elastic d. Demand for the product is essentially price inelastic. e. None of the above.

c. Demand for the product is essentially price elastic

Understanding costs faced by the firm when making pricing decisions is important because: a. Costs constitute the maximum possible price that can be charged for a product. b. Prices can never be set lower than costs. c. Prices must be set with a knowledge of the costs required to make and sell the product. d. Prices are not related to costs. e. Costs are directly proportional to prices charged by Marketing Foundations competitors.

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

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

d. All of the above.

Which of the following would be the least effective way to estimate the demand curve for a new product similar to one already produced by competitors? a. Using buy-response data from a survey b. A controlled test market in which several prices were tested in a number of test cities c. A laboratory experiment in which a sample of consumers are asked to respond to a number of test prices. d. Managerial judgment e. Historical ratios based on similar competitors' products

d. Managerial judgment

A retailer pays $75 for a leather jacket and desires a 65% mark-up on products of this type. What will be the price to consumers for this jacket (round to the nearest penny and include the dollar sign)? Answer format is $XXX.XX

his is a straight-forward application of markup pricing, where the markup is based on the anticipated retail selling price of the product: Price = $75 / (1-.65) = $214.2857 or $214.29 (rounded)