Question 1

Claxton Bakery recently began selling its fruitcakes online.If Claxton wants a simple pricing system that allows for different shipping charges depending on geographic segment or region,the company should use _____ pricing.
A) two-part
B) uniform delivered
C) freight absorption
D) flexible
E) zone

Accepted Answer

In zone pricing sets freight prices according to geographic areas.

Question 2

The basic assumption behind value-based pricing is that:
A) the firm is sales-driven
B) the firm is both customer-driven and competitor-driven
C) increased profitability for wholesalers will increase the number of services they are willing to perform
D) consumers are more concerned about price than quality
E) additional long-term costs to manufacturers will increase

Accepted Answer

The basic assumption is the business is seeking to understand its customers.Because it is unlikely to be operating as a monopoly,it must also pay attention to what its competitors are doing.

Question 3

If a company decides to divide its market area into segments or regions and charge a flat rate for freight to all customers in a given region,the company is using _____ pricing.
A) zone
B) uniform delivered
C) freight absorption
D) FOB origin
E) basing-point

Accepted Answer

Zone pricing divides the total market into segments or zones and charges a flat freight rate to all customers in a given zone.

Question 4

Dancing Pigs Bar-B-Que Sauce is a product of the Bar-B-Q Shop located in Memphis,Tennessee.It's also sold online for $88 a case,including shipping and handling.The Bar-B-Q shop covers the cost of shipping and uses _____ pricing policy.
A) penetration
B) skimming
C) zone
D) basing point
E) freight absorption

Accepted Answer

In freight absorption pricing the seller pays the actual freight charges and does not pass the charges along to the customer.

Question 5

Uniform delivered pricing:
A) creates no geographic price discrimination
B) is sometimes called "postage stamp pricing"
C) is prevalent in the steel,cement,corn oil,and lead industries
D) is common where freight costs are a large portion of total costs
E) is calculated from regional base points

Accepted Answer

With uniform delivered pricing,all customers pay the same amount for freight regardless of location.

Question 6

Uniform delivered pricing enables a firm to:
A) charge each customer the actual cost of shipping its products
B) stir up price competition between buyers
C) maintain a nationally advertised price
D) discriminate in favor of buyers that are geographically closer to the seller
E) charge each customer its fair share of the cost of shipping

Accepted Answer

With uniform delivered pricing,all customers will pay the same price regardless of their location.

Question 7

An Alabama-based catalog retailer sells fireplace equipment such as screens and andirons.Its customers in New England are charged one shipping rate,and customers west of the Rocky Mountains are charged a different rate.Customers in the midwestern states are charged yet another rate.What kind of geographic pricing is the catalog retailer using?
A) FOB origin pricing
B) FOB factory
C) Zone pricing
D) Freight absorption pricing
E) Uniform delivered pricing

Accepted Answer

Zone pricing is a modification of uniform delivered pricing that divides the United States into segments or zones and a charges a flat rate to all customers in that zone.

Question 8

Each fall,ABC Men's Wear holds a major sale,reducing the prices of suits that didn't sell.ABC Men's Wear expects the suit manufacturers to absorb some of the cost of the price reduction through:
A) promotional allowances
B) leader pricing reductions
C) manufacturer price skimming
D) markdown money
E) make-up allowances

Accepted Answer

Retailers often expect manufacturers to help absorb the costs of markdowns by paying markdown money

Question 9

The term FOB is an acronym for:
A) free on board
B) fee on buyer
C) first on board
D) freight on board
E) freight origin buyer

Accepted Answer

FOB means free on board and is called FOB origin pricing or FOB shipping point and is a price tactic that requires the buyer to absorb the freight costs from the shipping point.

Question 10

If a manufacturer designates a shipping point from which to calculate all freight charges and charges customers the freight costs from that point (even if the goods were shipped from another location),the manufacturer is using _____ pricing.
A) freight absorption
B) uniform delivered
C) zone
D) FOB origin
E) basing-point

Accepted Answer

With a basing-point price,the seller designates a location as a basing point and charges all buyers the freight costs from that point.

Question 11

_____ occurs when a firm is customer-driven and seeks to understand the attributes customers want in the goods and services they buy and the value of those attributes to customers.Thus,the price of the product is set at a level that seems to the customer to be a good price compared with the prices of other options.
A) Value-based pricing
B) Noncumulative pricing
C) CRM pricing
D) Market concept pricing
E) Price bundling

Accepted Answer

Instead of figuring prices based on costs or competitors' prices,value-based pricing starts with the customer,considers the competition,and then determines the appropriate price.

Question 12

L.L.Bean charges all customers the same flat freight rate.It uses:
A) FOB origin pricing
B) zone pricing
C) freight absorption pricing
D) basing-point pricing
E) uniform delivered pricing

Accepted Answer

In uniform delivery pricing,all customers are charged the same flat freight rate.

Question 13

A price tactic that requires the purchaser to absorb the freight costs from the shipping point is called _____.In this case,the farther buyers are from sellers,the more they pay because transportation costs generally increase with the distance merchandise is shipped.
A) basing-point pricing
B) zone pricing
C) uniform delivered pricing
D) freight absorption pricing
E) FOB origin pricing

Accepted Answer

This is the definition of FOB origin pricing.

Question 14

One pharmaceutical manufacturer did not price a new antiulcer drug by adding up the costs of developing and manufacturing the medication and tacking on the amount of profit it wanted to make.Instead,the company justified a higher price than it might otherwise have been able to get from medical insurers by using studies that showed the new drug could help patients avoid expensive surgery and save the insurance companies money.The pharmaceutical company used:
A) value-based pricing
B) noncumulative pricing
C) CRM pricing
D) price bundling
E) market concept pricing

Accepted Answer

Value-based pricing occurs when a firm is customer-driven and seeks to understand the attributes customers want in the goods and services they buy and the value of those attributes to customers.Thus,the price of the product is set at a level that seems to the customer to be a good price compared with the prices of other options.

Question 15

If the seller pays all or part of the actual freight charges and does not pass them on to the buyer,the seller is using _____ pricing.
A) freight absorption
B) uniform delivered
C) zone
D) FOB origin
E) basing-point

Accepted Answer

This is the definition of freight absorption pricing,and the manager may use this tactic in intensely competitive areas or as a way to break into a new market.

Question 16

All of the following are geographic pricing methods EXCEPT:
A) latitude pricing
B) FOB origin pricing
C) zone pricing
D) freight absorption pricing
E) basing-point pricing

Accepted Answer

Another geographic pricing method is uniform delivered pricing.

Question 17

Toyota periodically offers customers _____,allowing purchasers to borrow money to pay for new cars without incurring an interest charge.
A) markdown money
B) zero percent financing
C) promotional allowances
D) make-up allowances
E) leader pricing reductions

Accepted Answer

This tactic creates a huge increase in sales-but not without cost to the automakers.

Question 18

Sometimes managers price their products too low,resulting in a loss of company profits.One reason this happens is that:
A) managers attempt to buy market share through aggressive pricing,but the cuts are quickly met by competitors,which wipe out any gain in market share
B) consumers tend to equate lower prices with low-quality goods,and they are never able to regain that lost market share
C) price-skimming strategies only work in the short-term,and always eventually result in lower profits
D) most managers simply lack good business sense,especially in regard to finances
E) all of the above are reasons

Accepted Answer

Another reason is that managers have a natural tendency to want to make decisions that can be justified objectively,but companies often lack hard data to make good decisions.

Question 19

A national manufacturer of car parts has six warehouses and has a pricing policy of charging freight from the closest warehouse to the customer,regardless of where parts are shipped from.For instance,if the customer is in Vancouver,British Columbia,the closest warehouse to the customer is in Seattle,Washington.If the ordered car part actually comes from the Alabama warehouse,the customer still pays freight from Seattle.The manufacturer uses _____ pricing.
A) FOB origin
B) uniform delivered
C) zone
D) basing-point
E) freight absorption

Accepted Answer

In basing-point pricing,customers pay freight from a set base point,regardless of the location from which the goods are shipped.

Question 20

With _____,the seller pays the actual freight charges and bills every purchase with an identical,flat freight charge.
A) uniform delivered pricing
B) zone pricing
C) FOB origin pricing
D) freight absorption pricing
E) basing-point pricing

Accepted Answer

If the marketer wants total costs,including freight,to be equal for all purchasers of identical products,the firm will adopt uniform delivered pricing,or "postage stamp" pricing.

Quiz 20: Setting the Right Price

Claxton Bakery recently began selling its fruitcakes online.If Claxton wants a simple pricing system that allows for different shipping charges depending on geographic segment or region,the company should use _____ pricing.

The basic assumption behind value-based pricing is that:

If a company decides to divide its market area into segments or regions and charge a flat rate for freight to all customers in a given region,the company is using _____ pricing.

Dancing Pigs Bar-B-Que Sauce is a product of the Bar-B-Q Shop located in Memphis,Tennessee.It's also sold online for $88 a case,including shipping and handling.The Bar-B-Q shop covers the cost of shipping and uses _____ pricing policy.

Uniform delivered pricing:

Uniform delivered pricing enables a firm to:

Each fall,ABC Men's Wear holds a major sale,reducing the prices of suits that didn't sell.ABC Men's Wear expects the suit manufacturers to absorb some of the cost of the price reduction through:

The term FOB is an acronym for:

If a manufacturer designates a shipping point from which to calculate all freight charges and charges customers the freight costs from that point (even if the goods were shipped from another location) ,the manufacturer is using _____ pricing.

L.L.Bean charges all customers the same flat freight rate.It uses:

A price tactic that requires the purchaser to absorb the freight costs from the shipping point is called _____.In this case,the farther buyers are from sellers,the more they pay because transportation costs generally increase with the distance merchandise is shipped.

If the seller pays all or part of the actual freight charges and does not pass them on to the buyer,the seller is using _____ pricing.

All of the following are geographic pricing methods EXCEPT:

Toyota periodically offers customers _____,allowing purchasers to borrow money to pay for new cars without incurring an interest charge.

Sometimes managers price their products too low,resulting in a loss of company profits.One reason this happens is that:

With _____,the seller pays the actual freight charges and bills every purchase with an identical,flat freight charge.