Question 1

In the context of supply influences in purchasing decisions,which of the following statements is true of cost-oriented pricing?

Accepted Answer

Cost-oriented pricing is a common approach to pricing in practice and is believed by many practitioners to yield a good price decision. This approach considers the costs involved in producing and selling a product or service and adds a markup to determine the selling price. It gives less consideration to demand factors and may result in higher prices than those determined by demand-oriented pricing, but it also minimizes price competition among industries.

Question 2

Which of the following is a variation of cost-oriented pricing?

Accepted Answer

Rate-of-return pricing is a variation of cost-oriented pricing that involves determining the cost of producing and selling a product, including a predetermined profit margin, to arrive at the final selling price. Odd-even pricing involves setting prices that end in odd or even numbers to appeal to customers' psychological tendencies, while bundle pricing involves offering discounts when multiple products are purchased together. Prestige pricing involves setting prices high to convey a sense of luxury and exclusivity.

Question 3

One of the disadvantages associated with cost-oriented approaches to pricing is that:

Accepted Answer

Cost-oriented approaches to pricing may not take into account the prices of competitors, which can result in pricing that is either too high or too low. This can lead to lost sales or reduced profitability. Therefore, cost-oriented approaches may not adequately reflect competition.

Question 4

Which of the following is true of pricing objectives?

Accepted Answer

Pricing to achieve a target return on investment is a common pricing objective, as it helps the company ensure profitability and calculate their return on investment. Pricing objectives should be aligned with overall marketing objectives, and often involve some form of competition analysis. While short-run profits may be a consideration, the basic pricing objective is generally broader in scope and considers long-term goals as well.

Question 5

The estimated production and sales for a coffee table book on celebrity gardening is 10,000 volumes at a total cost of $100,000.Calculate the sales price for each book if the publisher desires a before-tax return of 25 percent.

Accepted Answer

The answer of The estimated production and sales for a...

Question 6

In the context of retail pricing strategies,which of the following is most likely an advantage of the high/low pricing strategy?

Accepted Answer

High/low pricing strategy, where prices are initially set high and then discounted over time, helps in selling slow-moving merchandise by attracting customers with markdowns and sales, thus clearing out inventory.

Question 7

Which of the following is defined as an approach to pricing in which a seller charges a relatively high price on a new product initially in order to recover costs and make profits rapidly and then lowers the price at a later date to make sales to more price-sensitive buyers?

Accepted Answer

Skimming pricing policy is defined as an approach to pricing in which a seller charges a relatively high price on a new product initially in order to recover costs and make profits rapidly and then lowers the price at a later date to make sales to more price-sensitive buyers.

Question 8

Markup pricing is a variation of cost-oriented pricing in which:

Accepted Answer

Markup pricing involves adding a percentage to the retailer's invoice price to determine the final selling price of the product. This percentage is usually determined by the retailer based on factors such as the level of competition, the target market, and the overall pricing strategy. It is a commonly used pricing method in retail and is relatively simple to calculate.

Question 9

Which of the following is true of a high/low pricing strategy?

Accepted Answer

High/low pricing strategy involves setting prices higher than competitors but then frequently offering sales, which can condition customers to wait for these sales to make purchases.

Question 10

Which of the following businesses is most likely to use rate-of-return pricing?

Accepted Answer

Rate-of-return pricing is most commonly used in businesses that have high startup costs and long-term investment, such as a glass manufacturer where a high volume of resources and technology is used. Grocery wholesalers, clothing retailers, and construction companies usually use other pricing strategies such as markup pricing or value-based pricing.

Question 11

Jenna sells ice creams at the beach each summer.Each bar of ice cream costs her 20′.She adds on an additional 20′ to each bar to pay for electricity for the freezer,napkins,and her time,finally selling her ice creams at 40′ a bar.In this scenario,Jenna uses _____.

Accepted Answer

The scenario describes a markup pricing strategy. Jenna is adding an additional 20′ to the cost of each bar of ice cream to cover her expenses and make a profit, resulting in a selling price of 40′ per bar. This is a common approach to pricing in retail, where the seller adds a markup (fixed amount or percentage) to the cost of the product to determine the selling price.

Question 12

_____ is most often used to describe the pricing of jobs that are nonroutine and difficult to "cost" in advance.

Accepted Answer

Cost-plus pricing is most often used for jobs that are nonroutine and difficult to "cost" in advance because it allows the company to ensure that they will make a profit on the job, even if unexpected costs arise during the project. The company adds a markup (percentage or dollar amount) to the estimated cost of the project to arrive at the final price. This method is often used in industries such as construction, engineering, and custom manufacturing. Target costing is used for routine products, rate-of-return pricing is used for determining the price to earn a desired rate-of-return, and marked pricing is not a commonly used pricing method.

Question 13

Which of the following is a common pricing objective?

Accepted Answer

Pricing to achieve a target market share is a common pricing objective as it focuses on capturing a specific percentage of the market by setting prices that are competitive and attractive to customers. This approach can help a company to increase market share, which in turn can lead to increased sales and revenues. The other options are not as common or as effective as a pricing objective, as they do not always align with the overall goals of the company.

Question 14

Which of the following is an advantage of using the everyday low pricing (EDLP)strategy?

Accepted Answer

The EDLP strategy tends to reduce advertising and operating expenses because it eliminates the need for frequent price promotions and price changes. By keeping prices consistently low, retailers can avoid spending money on advertising and merchandising to promote sales or clear out slow-moving inventory. Option A is incorrect because the EDLP strategy aims to provide consistently low prices for all customers, not just those who are willing to pay higher prices. Option B is partially correct because the EDLP strategy may reduce the amount of slow-selling merchandise, but it does not necessarily guarantee that all slow-selling items will be sold. Option D is incorrect because the EDLP strategy is not designed to create excitement or draw a lot of customers through sales events or promotions, but rather through the promise of low prices every day.

Question 15

_____ is defined as a cost-oriented pricing approach that involves totaling up the costs of producing a product or completing a project and then adding on a percentage or fixed profit amount.

Accepted Answer

Cost-plus pricing involves calculating the total cost of production and then adding a percentage or fixed profit margin to determine the final price. This approach is commonly used in manufacturing and construction industries, where projects have a clear set of inputs and require accurate cost estimation.

Question 16

Which of the following is true of the rate-of-return approach to pricing?

Accepted Answer

The rate-of-return approach to pricing is commonly used by manufacturers as it focuses on determining the price that will provide a desired rate of return on investment for the company. This approach involves calculating the total cost of producing and distributing the product and then adding a markup to the cost to determine the selling price.

Question 17

For which of the following products is a producer most likely to use cost-plus pricing?

Accepted Answer

Cost-plus pricing is most suitable for customized or unique projects where the costs can be accurately estimated and a markup can be added on top. A landscaping project of a five-acre public park fits this description, as it would involve specific costs that can be calculated and then marked up to determine a final price.

Question 18

Which of the following product characteristics affecting pricing typically involves discounting products as they approach being no longer fit for sale?

Accepted Answer

Perishability refers to the tendency of products to deteriorate over time, and as a result, products that are approaching their expiration date or becoming obsolete may need to be discounted to encourage consumers to purchase them before they can no longer be sold.

Question 19

Which of the following is defined as a cost-oriented pricing approach that involves adding a percentage to an invoice price in order to determine a final selling price?

Accepted Answer

Markup pricing is a cost-oriented pricing approach that involves adding a percentage to an invoice price in order to determine a final selling price. Odd-even pricing involves setting prices at odd or even numbers to create a perception of a better deal, predatory pricing involves setting very low prices to drive competitors out of business, and bundle pricing involves offering several products or services for a lower combined price.

Question 20

Markup pricing:

Accepted Answer

Markup pricing is commonly used in retailing as it involves adding a fixed percentage to the cost of goods to determine the selling price.

Quiz 11: Pricing Strategy