Question 1

Jiffy Cake Mix Company developed a new brownie mix that is much improved over its current brownie mix. When a sales representative for Jiffy contacted a buyer for a major supermarket chain, the buyer demanded that Jiffy give the supermarket chain a combination of cash and free cases of goods whose total value exceeded the entire marketing budget Jiffy planned to spend on the new brownie mix during its first year on the market. When the sales representative from Jiffy protested, the buyer said, "It is company policy to get ______________ in order to secure shelf space for new brands."
A) push money
B) advertising allowances
C) quantity discounts
D) stocking allowances
E) sale prices

Accepted Answer

Stocking allowances, sometimes called slotting allowances, are given to an intermediary to get shelf space for a product. They may come in the form of cash or free merchandise.

Question 2

A firm has just received an invoice for $1,000 with the following terms: 3/10, net 30. In this case, the firm: A) should not worry about earning the cash discount because the amount is small. B) can take a 10 percent discount if it pays within 3 days, and otherwise the full amount is due in 30 days. C) can take a 3 percent discount if it pays the invoice on the 30^th day. D) in effect, will be borrowing at an annual rate of 54 percent if it pays the invoice in 30 days. E) should pay $900 if it pays within 10 days.

Accepted Answer

A discount of 3/10, net 30 means that the buyer earns a 3 percent discount for paying the invoice just 20 days sooner than it should be paid. By not taking the discount, the company in effect is borrowing at an annual rate of 54 percent. (360 days/20 days) = 18 periods; (18 periods * 3 percent) = 54 percent a year.

Question 3

A producer offers a retailer free merchandise to stock a new item. The retailer is receiving a
A) spiff.
B) cash discount.
C) seasonal discount.
D) slotting allowance.
E) cumulative quantity discount.

Accepted Answer

Stocking allowances, sometimes called slotting allowances, are given to an intermediary to get shelf space for a product. They may come in the form of cash or free merchandise.

Question 4

A(n) _____ involves making small payments for a product over time-usually with interest payments built in.
A) installment
B) rebate
C) investment
D) quantity discount
E) stocking allowance

Accepted Answer

An installment involves making small payments over time-usually with interest payments built in. This approach has been used to open rural markets in the developing countries of Africa and Latin America to portable solar energy.

Question 5

A reduction from list price given to intermediaries to get shelf space for a product is a:
A) shelf allocation.
B) brokerage allowance.
C) trade allowance.
D) stocking allowance.
E) push money allowance.

Accepted Answer

Stocking allowances, sometimes called slotting allowances, are given to an intermediary to get shelf space for a product.

Question 6

Cash discount terms of 2/10, net 30 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 for 30 days.
A) 10
B) 30
C) 18
D) 12
E) 36

Accepted Answer

A discount of 2/10, net 30 means that the buyer earns a 2 percent discount for paying the invoice just 20 days sooner than it should be paid. By not taking the discount, the company in effect is borrowing at an annual rate of 36 percent. (360 days/20 days) = 18 periods; (18 periods * 2 percent) = 36 percent a year.

Question 7

A trade discount is also called a _____.
A) cumulative quantity discount
B) noncumulative quantity discount
C) seasonal discount
D) stock discount
E) functional discount

Accepted Answer

A trade discount, also called a functional discount, is a list price reduction given to channel members for the job they are going to do.

Question 8

To get the sale price, customers
A) buy when they have to buy.
B) buy when the seller wants to sell.
C) have to buy things that they never need.
D) have to give up all consumer surplus.
E) buy when they have a necessity.

Accepted Answer

To get the sale price, customers give up the convenience of buying when they want to buy and instead buy when the seller wants to sell.

Question 9

It is not uncommon for sales personnel at The Electronics Showroom to use aggressive sales tactics to encourage customers to buy Giant-Size brand televisions. Giant-Size has encouraged this behavior by using:
A) advertising allowances.
B) push money allowances.
C) stocking allowances.
D) trade-in allowances.
E) slotting allowances.

Accepted Answer

Push money (or prize money) allowances-sometimes called PMs or spiffs-are given to retailers by manufacturers or wholesalers to pass on to the retailers' salesclerks for aggressively selling certain items.

Question 10

"Push money" is most likely to be offered to:
A) cosmetics salespeople at a department store.
B) salesclerks at a grocery store.
C) component materials' sales reps.
D) industrial supplies' sales reps.
E) Each of these is equally likely to receive "push money."

Accepted Answer

Push money (or prize money) allowances are given to retailers by manufacturers or wholesalers to pass on to the retailers' salesclerks for aggressively selling certain items. They are often used for pushing furniture, clothing, consumer electronics, and cosmetics.

Question 11

Some manufacturers give ______________ to retailers to pass on to the retailers' salesclerks to encourage aggressive selling of specific items or lines.
A) advertising allowances
B) cash discounts
C) slotting allowances
D) "push money"
E) quantity discounts

Accepted Answer

Push money (or prize money) allowances are given to retailers by manufacturers or wholesalers to pass on to the retailers' salesclerks for aggressively selling certain items.

Question 12

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

Accepted Answer

Supermarkets are more willing to give space to a new product if the supplier will offset their handling costs and risks by providing stocking allowances.

Question 13

Teenagers and young adults with no income and few assets are sometimes prime targets for credit card companies. In response, Congress in 2009 passed the Credit CARD Act, which requires that anyone under age ____ must have a cosigner or prove they can repay any debt.
A) 16
B) 18
C) 21
D) 23
E) 25

Accepted Answer

The U.S. Congress passed the Credit CARD Act of 2009, which offers protections for college-age students and requires that anyone under 21 must now have a cosigner or prove they can repay any debt.

Question 14

Everyday low pricing of consumer convenience products:
A) tends to reduce fluctuations in prices customers actually pay.
B) has been used by many retailers even though no producers have adopted this approach.
C) makes it easy to quickly compete on price-without changing the basic strategy-when a competitor offers a particularly large discount for a short period of time.
D) relies on frequent discounts and allowances from the producer.
E) confuses customers and increases selling costs.

Accepted Answer

Everyday low pricing is setting a low list price rather than relying on frequent sales, discounts, or allowances.

Question 15

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 for 60 days.
A) 22
B) 72
C) 14
D) 18
E) 36

Accepted Answer

A discount of 2/10, net 60 means that the buyer earns a 2 percent discount for paying the invoice just 50 days sooner than it should be paid. By not taking the discount, the company in effect is borrowing at an annual rate of 14.4 percent. (360 days/50 days) = 7.2 periods; (7.2 periods * 2 percent) = 14.4 percent a year.

Question 16

A discount that is offered to encourage buyers to stock earlier than present demand requires is:
A) a cash discount.
B) a seasonal discount.
C) a quantity discount.
D) "push money."
E) a credit discount.

Accepted Answer

Seasonal discounts are discounts offered to encourage buyers to buy earlier than present demand requires.

Question 17

A reduction from list price given to retailers to get shelf space for a product is a:
A) shelf allocation.
B) brokerage allowance.
C) trade allowance.
D) slotting allowance.
E) push money allowance.

Accepted Answer

Stocking allowances, sometimes called slotting allowances, are given to an intermediary to get shelf space for a product.

Question 18

A producer of plastic water bottles that can be attached to bikes gives retailers a 3 percent price reduction to advertise its products locally. This is an example of:
A) value pricing.
B) push money.
C) everyday low pricing.
D) an advertising allowance.
E) a cash discount.

Accepted Answer

Advertising allowances are price reductions given to firms in the channel to encourage them to advertise or otherwise promote the supplier's products locally.

Question 19

Sears reduces prices on gas grills between November and February, prior to spring and summer. This price reduction is a:
A) stocking allowance.
B) seasonal discount.
C) noncumulative quantity discount.
D) cumulative quantity discount.
E) cash discount.

Accepted Answer

Seasonal discounts are discounts offered to encourage buyers to buy earlier than present demand requires.

Question 20

Jackson makes a contractual agreement with a car rental company to use a Chevy Silverado pickup truck for a specified period of time during which he has to pay the company a monthly fee over the course of that period. At the end of the specified period, Jackson will have to return the vehicle to the company unless he decides to purchase it. Which of the following policies is the car rental company employing in this scenario?
A) Leasing
B) Everyday low pricing
C) Seasonal discounts
D) Quantity discounts
E) Installments

Accepted Answer

A lease involves the payment of a monthly fee over a specified time period (usually three years). At the end of the specified period, the person leasing the product has to purchase it or return it, while the purchaser still owns that product.

Quiz 16: Pricing Objectives and Policies

A firm has just received an invoice for $1,000 with the following terms: 3/10, net 30. In this case, the firm:

A producer offers a retailer free merchandise to stock a new item. The retailer is receiving a

A(n) _____ involves making small payments for a product over time-usually with interest payments built in.

A reduction from list price given to intermediaries to get shelf space for a product is a:

Cash discount terms of 2/10, net 30 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 for 30 days.

A trade discount is also called a _____.

To get the sale price, customers

It is not uncommon for sales personnel at The Electronics Showroom to use aggressive sales tactics to encourage customers to buy Giant-Size brand televisions. Giant-Size has encouraged this behavior by using:

"Push money" is most likely to be offered to:

Some manufacturers give ______________ to retailers to pass on to the retailers' salesclerks to encourage aggressive selling of specific items or lines.

A retailer might expect a stocking allowance:

Teenagers and young adults with no income and few assets are sometimes prime targets for credit card companies. In response, Congress in 2009 passed the Credit CARD Act, which requires that anyone under age ____ must have a cosigner or prove they can repay any debt.

Everyday low pricing of consumer convenience products:

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 for 60 days.

A discount that is offered to encourage buyers to stock earlier than present demand requires is:

A reduction from list price given to retailers to get shelf space for a product is a:

A producer of plastic water bottles that can be attached to bikes gives retailers a 3 percent price reduction to advertise its products locally. This is an example of:

Sears reduces prices on gas grills between November and February, prior to spring and summer. This price reduction is a: