Question 1

Burger King recently announced plans to drop the price of its double cheese burger from $1.99 to just 99 cents in order to match McDonalds pricing.This is an example of a ____________.
A) profitability strategy
B) volume strategy
C) price war
D) prestige objective

Accepted Answer

The answer of Burger King recently announced plans to drop...

Question 2

Texaco and Shell are located directly across the street from one another.Texaco lowers its price for regular unleaded by 5 cents,and Shell quickly follows suit.What pricing objective is Shell using?
A) Competitive pricing
B) Skimming pricing
C) Odd pricing
D) Penetration pricing

Accepted Answer

Shell is using a competitive pricing strategy by lowering its price to match Texaco's, in order to remain competitive in the market. Skimming pricing is a strategy in which a company sets a high initial price for a product and then gradually lowers the price over time. Odd pricing and penetration pricing are not relevant in this scenario.

Question 3

The method of determining the minimum sales volume needed at a certain price level to cover all costs is ________.
A) market share analysis
B) equilibrium pricing
C) return on sales
D) breakeven analysis

Accepted Answer

Breakeven analysis is the method used to determine the minimum sales volume needed to cover all costs. Market share analysis is the analysis of a company's sales in relation to the total market sales, equilibrium pricing refers to setting prices where the demand and supply curves intersect, and return on sales is the ratio of net income to sales.

Question 4

Setting a price relatively high compared to similar goods and then gradually lowering it is a pricing strategy called ________ pricing.
A) psychological
B) cost-based
C) skimming
D) penetration

Accepted Answer

Skimming pricing involves setting a high initial price for a product or service and then gradually lowering the price over time. This strategy is often used for new or innovative products where there is little competition, and a high price can be charged to consumers who are willing to pay a premium for the product. As the market becomes more saturated, the price is gradually lowered to appeal to a wider range of consumers.

Question 5

Assume a product costs $5 each.The variable cost per unit is currently $4,and fixed costs are $25,000.If the company can alter its production method such that variable costs fall to $3.50 and fixed costs rise to $30,000,what will happen to the breakeven point?
A) It will fall.
B) It will rise.
C) It will remain the same.
D) It will rise and fall later.

Accepted Answer

The breakeven point is the point at which the revenue earned by selling a product covers the total cost of producing it. 
The original breakeven point can be calculated as follows:

Breakeven Point = (Fixed Costs) / (Price - Variable Costs) 
Breakeven Point = ($25,000) / ($5 - $4) 
Breakeven Point = 25,000

So, the company needs to sell 25,000 units to break even.

Now, if the variable costs decrease to $3.50 and fixed costs increase to $30,000, the new breakeven point can be calculated as follows:

Breakeven Point = (Fixed Costs) / (Price - Variable Costs) 
Breakeven Point = ($30,000) / ($5 - $3.50) 
Breakeven Point = 30,000 / 1.50 
Breakeven Point = 20,000

So, the company now needs to sell only 20,000 units to break even, which is a decrease from the original breakeven point of 25,000 units. Therefore, the answer is A) It will fall.

Question 6

Competitive pricing focuses on ________.
A) variable pricing
B) penetration pricing
C) the marketing mix
D) skimming pricing

Accepted Answer

The answer of Competitive pricing focuses on ________.
A) variable pricing
B)...

Question 7

In breakeven analysis,total cost is composed of ________.
A) price divided by number of units sold
B) variable costs minus fixed costs
C) total variable costs and total fixed costs
D) total sales minus expenses

Accepted Answer

In breakeven analysis, total cost is composed of both total variable costs and total fixed costs. Total variable costs are costs that vary with the level of production or sales, while total fixed costs are costs that remain constant regardless of the level of production or sales. Therefore, option C is the best choice. Option A is incorrect because it only includes the price of the product and number of units sold, without considering costs. Option B is incorrect because it only includes variable and fixed costs without combining them into total costs. Option D is incorrect because it only measures sales and expenses, without differentiating between variable and fixed costs.

Question 8

T-shirts Unlimited is conducting a breakeven analysis on unbleached cotton tops.Fixed costs are $100,000 and the per-unit contribution to fixed costs is $20.To break even,the company must sell ________ units.
A) 20,000
B) 5,000
C) 500
D) 200

Accepted Answer

To calculate the breakeven point, we can use the formula: Breakeven point = Fixed costs / Contribution margin per unit.

In this case, Fixed costs = $100,000 and Contribution margin per unit = $20.

Breakeven point = $100,000 / $20 = 5,000 units.

Therefore, the company must sell 5,000 units to break even. The answer is B.

Question 9

A local bakery wanted to attract more customers during the week,so it began offering a dozen bagels for $5 every Wednesday.The bakery utilized ________ pricing to increase its volume of sales.
A) discount
B) skimming
C) odd
D) everyday low

Accepted Answer

The bakery utilized discount pricing by offering a reduced price for a limited period of time (every Wednesday).

Question 10

Pure Products is introducing a new paper coffee filter at a dramatically reduced cost.Pure Products expects that competitors will come out with similar products within a short period of time.Which pricing strategy will enable Pure Products to discourage competitors?
A) Skimming pricing
B) Penetration pricing
C) Psychological pricing
D) Cost-based pricing

Accepted Answer

Penetration pricing is a pricing strategy where a company sets a low price for its product or service to attract customers and gain market share. This strategy aims to discourage competitors from entering the market by making it difficult for them to match the low prices while maintaining profits. Therefore, in this case, Pure Products should choose penetration pricing to discourage competitors from entering the market.

Question 11

WalMart utilizes a pricing strategy of maintaining continuous low prices rather than relying on sales.This strategy is an example of ____________.
A) skimming pricing
B) psychological pricing
C) everyday low pricing
D) penetration pricing

Accepted Answer

The given pricing strategy of WalMart is an example of everyday low pricing, where the prices of the products are kept consistently low without relying on sales or promotions. This is done to attract budget-conscious customers and increase their loyalty towards the brand. Other pricing strategies such as skimming pricing, psychological pricing, and penetration pricing are not applicable in this case.

Question 12

Business costs that remain change with the level of production are called ________ costs.
A) inflexible
B) fixed
C) variable
D) production

Accepted Answer

Variable costs are the costs that vary with the level of production, such as labor and raw material costs. Fixed costs, on the other hand, remain the same regardless of the level of production, such as rent and salaries. Inflexible costs are a type of fixed cost that cannot be easily adjusted in the short term, such as long-term leases or loan repayments. Production costs are a general term that can refer to both fixed and variable costs involved in the production process.

Question 13

The Social Club is conducting a breakeven analysis to determine how many tickets it must sell at $20 each to break even on the Holiday Dance.Fixed costs are $4,000,and the variable cost per person is $10.To break even,the Social Club must sell ________ tickets.
A) 800
B) 500
C) 400
D) 80

Accepted Answer

To perform a breakeven analysis, we need to use the formula:

Breakeven Point = Fixed Costs / (Price per unit - Variable Costs per unit)

Here, the fixed costs are given as $4,000, the variable cost per person is $10, and the price per ticket is $20. Putting these values in the formula, we get:

Breakeven Point = 4000 / (20 - 10) = 400

Therefore, the Social Club must sell 400 tickets at $20 each to break even on the Holiday Dance. Thus, the best choice is C).

Question 14

In breakeven analysis,the costs that change with the level of production are considered ________ costs.
A) variable
B) recoverable
C) labour
D) fixed

Accepted Answer

In breakeven analysis, variable costs are the costs that change according to the level of production. These costs can include materials, labor, and other expenses directly associated with producing goods or services. Fixed costs, on the other hand, are costs that are not impacted by the level of production, such as rent, salaries, and insurance. Therefore, option A) is the correct answer.

Question 15

A company adds several features to one of its products,and cuts the price slightly.What is the company's objective,most likely?
A) Increase profits
B) Meet competition
C) Increase the prestige of the product
D) Increase the product's market share

Accepted Answer

The answer of A company adds several features to one...

Question 16

Which of the following statements regarding price and quality is supported by research?
A) The higher the price,the greater the sales volume.
B) Consumers' perception of product quality is related closely to the item's price.
C) Perception of quality has no relationship to price.
D) Quality and price always go hand-in-hand.

Accepted Answer

Research has shown that consumers tend to associate higher prices with higher quality, even if the actual quality of the product is not significantly better than a lower-priced alternative. This perception is reinforced by marketing tactics such as branding and packaging. However, there are instances where consumers will choose a lower-priced option over a perceived higher quality product, such as when the price difference is significant or when the consumer is motivated by other factors such as environmental sustainability or social responsibility.

Question 17

Albertson's,a large national supermarket chain,bases its pricing strategy primarily on which objective?
A) Volume
B) Profitability
C) Prestige
D) Breakeven analysis

Accepted Answer

Albertson's, like many large supermarket chains, typically focuses on a volume-based pricing strategy to attract a large number of customers and increase sales through competitive pricing.

Question 18

If you did a breakeven analysis for your firm,it would be possible for you to show management the point at which ________.
A) the firm's fixed costs would climb sharply
B) the firm would not make a profit if it sold additional units
C) profits would be maximized
D) the level of sales that will cover all of the company's costs

Accepted Answer

A breakeven analysis helps to determine the level of sales at which a company will be able to cover all of its costs. This includes both fixed and variable costs. Once this point is determined, it becomes easier for management to assess the profitability of the company and make decisions related to pricing, promotion, and cost management. A breakeven analysis does not provide information on when fixed costs will climb or when profits will be maximized.

Question 19

Chris is allowed to purchase a reasonably priced notebook computer for graduation.He sees one in Best Buy for $999.99 and calls his parents to assure them the computer costs "less than a thousand." Both Chris and Best Buy are using ________ to downplay the price of the computer.
A) cost-based pricing
B) personal selling
C) price fixing
D) odd pricing

Accepted Answer

Both Chris and Best Buy are using odd pricing, which is the tactic of setting prices to end in odd numbers, such as $0.99 or $0.95, to create the perception of a lower price. In this case, Chris is using it to make the price sound like it's under $1,000 while Best Buy is using it to make the price seem more affordable.

Question 20

Which of the following pricing objectives has the most influence on Rolex's pricing strategy?
A) Profitability
B) Prestige
C) Meeting the competition
D) Volume

Accepted Answer

Rolex is a luxury brand that emphasizes high quality and exclusivity, which is reflected in their pricing strategy. Prestige is the most influential pricing objective for Rolex, as they aim to maintain their positioning as a premium brand and charge premium prices accordingly. Profitability, meeting the competition, and volume may also play a role in Rolex's pricing strategy, but they are secondary to the company's focus on maintaining its prestigious brand image.

Quiz 13: Promotion and Pricing Strategies

Burger King recently announced plans to drop the price of its double cheese burger from $1.99 to just 99 cents in order to match McDonalds pricing.This is an example of a ____________.

Texaco and Shell are located directly across the street from one another.Texaco lowers its price for regular unleaded by 5 cents,and Shell quickly follows suit.What pricing objective is Shell using?

The method of determining the minimum sales volume needed at a certain price level to cover all costs is ________.

Setting a price relatively high compared to similar goods and then gradually lowering it is a pricing strategy called ________ pricing.

Assume a product costs $5 each.The variable cost per unit is currently $4,and fixed costs are $25,000.If the company can alter its production method such that variable costs fall to $3.50 and fixed costs rise to $30,000,what will happen to the breakeven point?

Competitive pricing focuses on ________.

In breakeven analysis,total cost is composed of ________.

T-shirts Unlimited is conducting a breakeven analysis on unbleached cotton tops.Fixed costs are $100,000 and the per-unit contribution to fixed costs is $20.To break even,the company must sell ________ units.

A local bakery wanted to attract more customers during the week,so it began offering a dozen bagels for $5 every Wednesday.The bakery utilized ________ pricing to increase its volume of sales.

Pure Products is introducing a new paper coffee filter at a dramatically reduced cost.Pure Products expects that competitors will come out with similar products within a short period of time.Which pricing strategy will enable Pure Products to discourage competitors?

WalMart utilizes a pricing strategy of maintaining continuous low prices rather than relying on sales.This strategy is an example of ____________.

Business costs that remain change with the level of production are called ________ costs.

The Social Club is conducting a breakeven analysis to determine how many tickets it must sell at $20 each to break even on the Holiday Dance.Fixed costs are $4,000,and the variable cost per person is $10.To break even,the Social Club must sell ________ tickets.

In breakeven analysis,the costs that change with the level of production are considered ________ costs.

A company adds several features to one of its products,and cuts the price slightly.What is the company's objective,most likely?

Which of the following statements regarding price and quality is supported by research?

Albertson's,a large national supermarket chain,bases its pricing strategy primarily on which objective?

If you did a breakeven analysis for your firm,it would be possible for you to show management the point at which ________.

Chris is allowed to purchase a reasonably priced notebook computer for graduation.He sees one in Best Buy for $999.99 and calls his parents to assure them the computer costs "less than a thousand." Both Chris and Best Buy are using ________ to downplay the price of the computer.

Which of the following pricing objectives has the most influence on Rolex's pricing strategy?