Question 1

A producer makes an item for $32 and sells it with a 50 percent markup to a wholesaler.The wholesaler then applies a 20 percent markup.A retailer then uses a 60 percent markup.The final retail selling price is

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays.The wholesaler's selling price becomes the retailer's cost.And this cost plus a retail markup becomes the retail selling price.Each markup should cover the costs of running the business and leave a profit.

Question 2

Stockturn rate refers to

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year.

Question 3

TopKnotch Mfg.Co.has a production cost of $280.It sells its product to a wholesaler for $400.The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000.Which of the following is true about this markup chain?

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays.The wholesaler's selling price becomes the retailer's cost.Next,this cost plus a retail markup becomes the retail selling price.Each markup should cover the costs of running the business and leave a profit.

Question 4

Mark is trying to determine his firm's average cost per unit of production.He finds that the cost for all labor and materials is $80,000,and fixed overhead expenses are $40,000.If the company produces 20,000 items in the time period,the average cost is

Accepted Answer

A manager usually finds the average cost per unit by studying past records.Dividing the total cost for the last year by all the units produced and sold in that period gives an estimate of the average cost per unit for the next year.

Question 5

One disadvantage of average-cost pricing is that

Accepted Answer

Average-cost pricing does not make allowances for cost variations at different levels of output.

Question 6

A regional manager for a chain of auto parts stores visits one of the stores in the chain.He looks in the store's warehouse and finds about 100 cases of motor oil that have been sitting in the warehouse for over one year.Upon inspection,he finds that in each case,one of the twelve cans of oil has leaked,thus soaking through the box and making the case unfit for sale.The regional manager instructs the store manager to unpack all the cases,discard the leaking cans,clean up the remaining cans,and contact the oil company for new boxes.He tells the store manager to repackage the remaining cans in the new boxes and to sell the cases to customers at the retailer's cost with no added markup.He explains to the store manager that moving this inventory will not result in immediate profit,but that it will benefit the store by improving the

Accepted Answer

Whether a stockturn rate is high or low depends on the industry and the product involved.

Question 7

Retailers of which of the following products would likely have the highest stockturn rate?

Accepted Answer

Whether a stockturn rate is high or low depends on the industry and the product involved.For example,a supermarket might expect 70 stockturns for fresh fruits and vegetables.Fresh seafood is a perishable item,so it would have the highest stockturn rate of the given choices.

Question 8

What is the first step in the markup chain?

Accepted Answer

The first step in the markup chain is selecting the appropriate cost per unit to build on.

Question 9

The number of times an intermediary's average inventory is sold in a year is called the

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year.

Question 10

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others.Best Buy apparently hopes to earn a profit by

Accepted Answer

A low stockturn rate may be bad for profits.Whether a stockturn rate is high or low depends on the industry and the product involved.

Question 11

Two hundred units of a good were produced at a total cost of $4,000.Given a total fixed cost equal to $1,800,the average total cost per unit will be equal to

Accepted Answer

The average cost per unit is obtained by dividing total cost by total quantity.In this case,the total cost is $4,000.Dividing by the total quantity,$200,results in an average cost per unit of $20.

Question 12

An intermediary seeking high profits should

Accepted Answer

A high markup may result in a price that's too high-a price at which few customers will buy.You can't earn much if you don't sell much,no matter how high your markup on a single item.So high markups may lead to low profits.Instead,try to find the markup level related to the most profitable price.

Question 13

High markups on a product could lead to low profits when

Accepted Answer

A high markup may result in a price that's too high,a price at which few customers will buy.So high markups may lead to low profits.

Question 14

The stockturn rate is

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year.

Question 15

Which of the following is true regarding markups and turnover?

Accepted Answer

Lower markups can speed turnover and the stockturn rate.Whether a stockturn rate is high or low depends on the industry and the product involved.

Question 16

Setting prices by adding a "reasonable" markup to a firm's average cost is called

Accepted Answer

Average-cost pricing means adding a reasonable markup to the average cost of a product.

Question 17

Wilson sells a basketball to a wholesaler for $16,and the wholesaler applies a 20 percent markup.A retailer then applies a 33.3 percent markup.The final selling price is

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays.The wholesaler's selling price becomes the retailer's cost.And this cost plus a retail markup becomes the retail selling price.Each markup should cover the costs of running the business and leave a profit.

Question 18

A firm with a stockturn rate of 5 that sells products that cost it $150,000 per year is keeping an average of ________ worth of inventory.

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year.A stockturn rate of 5 implies that the firm requires only $30,000 worth of inventory (150,000 ÷ 5).

Question 19

Which of the following statements about markups is true?

Accepted Answer

A high markup may result in a price that's too high-a price at which few customers will buy.So high markups may lead to low profits.

Question 20

It costs a producer $400 to manufacture a product that is distributed through wholesalers and retailers.The markups at the producer,wholesaler,and retailer levels are 20 percent,20 percent,and 50 percent,respectively.The wholesaler's selling price for the product is ________,and the retailer's selling price is ________.

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays.The wholesaler's selling price becomes the retailer's cost.And this cost plus a retail markup becomes the retail selling price.Each markup should cover the costs of running the business and leave a profit.

Quiz 18: Price Setting in the Business World

A producer makes an item for $32 and sells it with a 50 percent markup to a wholesaler.The wholesaler then applies a 20 percent markup.A retailer then uses a 60 percent markup.The final retail selling price is

Stockturn rate refers to

TopKnotch Mfg.Co.has a production cost of $280.It sells its product to a wholesaler for $400.The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000.Which of the following is true about this markup chain?

Mark is trying to determine his firm's average cost per unit of production.He finds that the cost for all labor and materials is $80,000,and fixed overhead expenses are $40,000.If the company produces 20,000 items in the time period,the average cost is

One disadvantage of average-cost pricing is that

Retailers of which of the following products would likely have the highest stockturn rate?

What is the first step in the markup chain?

The number of times an intermediary's average inventory is sold in a year is called the

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others.Best Buy apparently hopes to earn a profit by

Two hundred units of a good were produced at a total cost of $4,000.Given a total fixed cost equal to $1,800,the average total cost per unit will be equal to

An intermediary seeking high profits should

High markups on a product could lead to low profits when

The stockturn rate is

Which of the following is true regarding markups and turnover?

Setting prices by adding a "reasonable" markup to a firm's average cost is called

Wilson sells a basketball to a wholesaler for $16,and the wholesaler applies a 20 percent markup.A retailer then applies a 33.3 percent markup.The final selling price is

A firm with a stockturn rate of 5 that sells products that cost it $150,000 per year is keeping an average of ________ worth of inventory.

Which of the following statements about markups is true?