Question 1

Which factor is least likely to affect pricing decisions?

Accepted Answer

Shifting stock values are least likely to affect pricing decisions, as they are not directly related to the pricing strategy of a product or service. The other choices, such as competitive prices, legal and regulatory issues, organizational and marketing objectives, and customers' interpretation and response, all play a significant role in determining the pricing decisions for a product or service.

Question 2

Markum Industries determines that for its air compressors the following results are achieved at a price of $250: total costs = $250,000; variable costs per unit = $100; fixed costs = $175,000.Given these figures,Markum would break even at ____ units.

Accepted Answer

The answer of Markum Industries determines that for its air...

Question 3

Marketers generally view ____ as the minimum price a product can be sold for.

Accepted Answer

Marketers generally view costs as the minimum price a product can be sold for, as selling a product for any less than the total cost (fixed and variable) incurred in producing it would result in a loss for the company. However, in some cases, marketers may be willing to sell a product at a slight loss if it helps them gain market share or if they anticipate future profits from additional purchases or customer loyalty. Therefore, options A, B, C, and E do not accurately describe the minimum price a product can be sold for.

Question 4

To maintain market share and revenue in an increasingly price-sensitive market,companies have focused on quality,used labor-saving technologies,and used efficient manufacturing processes.These tactics have provided gains in productivity that have translated into ____ for the consumer.

Accepted Answer

Companies have been able to lower their costs by using labor-saving technologies and efficient manufacturing processes. This, in turn, has allowed them to offer lower prices to consumers while maintaining their market share and revenue. Therefore, the gains in productivity have translated into lower prices for the consumer.

Question 5

Premium-priced products are usually marketed through

Accepted Answer

Premium-priced products are often marketed through selective or exclusive distribution channels in order to maintain exclusivity and a perception of high value. Selective distribution allows the company to carefully choose which retailers or distributors to work with in order to maintain control over the brand image, while exclusive distribution restricts the product to only a few chosen retailers who are often required to have a certain level of exclusivity in terms of floor space or advertising.

Question 6

For most consumers,there is an assumed relationship between

Accepted Answer

Most consumers assume that there is a direct relationship between price and quality - the higher the price, the higher the quality of the product or service. This assumption influences the purchasing decisions of many consumers, making them more likely to choose higher-priced items when they want to ensure quality.

Question 7

The type of prices most likely to appear in advertising is

Accepted Answer

Advertising typically promotes products or services by emphasizing their value and affordability, which suggests that bargain prices are more likely to appear in advertising. Prestige prices may appear in high-end luxury advertising, but this is not as common. Future prices and internal reference prices are not typically used in advertising as they may confuse or create uncertainty for consumers. Cost-plus pricing is a cost accounting method used by businesses, but it is not a pricing strategy that is often communicated to consumers.

Question 8

What assumption does breakeven analysis make that limits its overall usefulness?

Accepted Answer

Breakeven analysis assumes that demand for a product is inelastic, meaning that changes in price will not significantly affect the quantity of the product demanded by consumers. This is a limiting assumption because in reality, demand for a product may be elastic, meaning that a small change in price can result in significant changes in demand. This can lead to inaccurate predictions of revenue and profits using breakeven analysis.

Question 9

The Highland Racquet Club found that with annual fixed costs of $60,000,its breakeven point is 2,000 members when the membership charge is $60 per person per year.What is the variable cost per person for Highland?

Accepted Answer

The breakeven point can be calculated as follows:
Breakeven point = (Fixed Costs) / (Price per person – Variable Costs per person)
2,000 = 60,000 / (60 – Variable Costs per person)
Variable Costs per person = $30 (after solving the equation)
Therefore, the correct answer is C) $30.

Question 10

Temporary price reductions through sales,rebates,and special discounts are often used to

Accepted Answer

Temporary price reductions are often used to raise cash quickly by increasing sales volume in the short term.

Question 11

If the product price is $100,average variable cost $40 per unit,and the total fixed costs are $120,000,what is the breakeven point?

Accepted Answer

The breakeven point in units can be calculated using the formula: Breakeven Point = Total Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Plugging in the given values: $120,000 / ($100 - $40) = $120,000 / $60 = 2,000 units.

Question 12

A marketer sometimes uses temporary price reductions to

Accepted Answer

Temporary price reductions are often used by marketers to gain market share by attracting new customers and encouraging existing customers to make a purchase. By offering a lower price, customers are more likely to choose their product over a competitor's. This can lead to increased sales and an improved market position for the company.

Question 13

A company trying to position itself as value oriented should not

Accepted Answer

Using premium pricing for products is the opposite of positioning oneself as value-oriented. Value-oriented companies typically offer lower prices for comparable quality products.

Question 14

Which of the following is not a major factor for firms making price decisions?

Accepted Answer

Previous sales may be considered as a reference point, but they are not a major factor in determining the price for a product or service. The major factors that influence price decisions include costs, competition, channel member expectations, and legal/regulatory issues.

Question 15

The point at which the costs of producing a product equal the revenue earned from selling the product is

Accepted Answer

The point at which the costs of producing a product equal the revenue earned from selling the product is called the breakeven point. This is important for businesses to know so they can determine how many units they need to sell to cover their costs and begin making a profit.

Question 16

A certain location of O'Charley's Restaurant has annual fixed costs of $200,000.If an average tab at the restaurant is $60 and the variable costs per tab is $20,how many groups of customers must O'Charley's serve per year in order to break even?

Accepted Answer

The answer of A certain location of O'Charley's Restaurant has...

Question 17

To determine the breakeven point in units,divide the fixed costs by

Accepted Answer

The breakeven point is the point at which total revenue equals total costs. In order to calculate the breakeven point in units, we need to know the contribution margin per unit (price per unit minus variable cost per unit) and divide the total fixed costs by the contribution margin per unit. Therefore, the correct choice is C, which is price minus variable costs.

Question 18

Suppose managers at Caterpillar have determined the costs associated with producing hay balers are equal to the price that they charge for the hay balers.This indicates that Caterpillar is producing at the ____ point.

Accepted Answer

The statement that the costs are equal to the price charged indicates that Caterpillar is breaking even, meaning they are not making a profit nor incurring a loss. This is the point where total revenue equals total costs, hence option A - breakeven is the correct answer.

Question 19

Below the breakeven point,a firm is operating

Accepted Answer

Below the breakeven point, the firm is operating at a loss. This is because the total revenue earned is not enough to cover the fixed costs and variable costs incurred in producing the goods/services.

Question 20

In the long run,the J.F.Smucker Company must view ____ as the absolute lowest price for its Jif brand peanut butter.

Accepted Answer

Total costs should be viewed as the absolute lowest price for Jif brand peanut butter as it takes into account both variable and fixed costs and ensures that the company is not selling the product at a loss. A 10 percent return on investment or product development costs do not necessarily reflect the true cost of producing and selling the product, and advertising expenditures and Nestlé's prices are external factors that should be taken into consideration but do not determine the absolute lowest price.

Quiz 19: Strategic Pricing Management