Question 1

As a graphic artist, Nate has just finished producing a new calendar. His calendar cost him $1.00 for the shiny paper, $2.00 for the six color production, and $.25 for the plastic wire that holds it together at the top. The labor in developing the design was 4 hours of work at $50/hour, and labor is being added to the rest of the fixed costs of $400.00. At a price of $12.00 per calendar, how many calendars will Nate need to produce and sell in order to break even (cover all his costs, but not make a profit)?
A) 690 calendars
B) 25 calendars
C) 40 calendars
D) 69 calendars

Accepted Answer

To break even, Nate needs to cover all of his costs, which include both fixed costs (such as labor and the plastic wire) and variable costs (such as the shiny paper and color production).

Variable costs per calendar: $1.00 + $2.00 + $0.25 = $3.25
Fixed costs: $400 + ($50/hour x 4 hours) = $600

Total cost per calendar: $3.25 + $600 (fixed cost/total # of calendars produced)

To break even:
Selling price per calendar = Total cost per calendar
$12.00 = $3.25 + ($600/x) 
Solving for x:
$8.75 = $600/x
x = 69

Therefore, Nate needs to produce and sell 69 calendars in order to break even.

Question 2

Mini-Case
Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked). Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product.
-Prime Cuts was the brainchild of Karen Terrier who guided all the marketing efforts of the product. She selected each element of the marketing mix such as the package, brand name, pricing, promotion, and placement decisions. Karen obviously serves in the job of:
A) marketing consultant.
B) brand manager.
C) operations analyst.
D) marketing intermediary.

Accepted Answer

Karen Terrier is responsible for selecting each element of the marketing mix for the new product, indicating that she serves as the brand manager for Gourmet Pets.

Question 3

Mini-Case
Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked). Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product.
-The company currently markets McDog T-bone, Lapdog Lunchtreats, Rover's Potroast, and Puppy Porterhouse in the dog food market. Prime Cuts will be an addition to the company's ___________ in the dog food market.
A) product mix
B) product line
C) product time
D) product screen

Accepted Answer

A product line is a group of related products marketed by a single company. Gourmet Pets currently markets several dog food products, and Prime Cuts will be an addition to this line. This differentiates it from a product mix (which refers to a company's entire range of products), product time (which refers to the lifecycle of a product), and product screen (which refers to the process of evaluating new product ideas).

Question 4

Mini-Case
Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked). Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product.
-Gourmet Pets feels its target market is more concerned with perceived quality than actual product cost. They also feel that the newness of this concept offers an opportunity to make high profits since they are the first firm to enter this market, so they face no direct competition. Their decision to charge a high price is consistent with the ________ strategy.
A) market pricing
B) price leadership
C) skimming price
D) penetration price

Accepted Answer

The strategy of charging a high price for a new product with no direct competition is consistent with the skimming price strategy. This strategy involves setting a high price to skim off the maximum amount of revenue from the market willing to pay the high price. It is commonly used for new and innovative products where there is no direct competition, and the target market is willing to pay a premium price for perceived quality or uniqueness. Gourmet Pets' promotion of their new product as "far superior" to "average" dog foods indicates that they are relying on perceived quality to justify their higher price point.

Question 5

Jian has entered into a contract with the federal government to design a computer simulation model for training helicopter pilots. The contract calls for the final price to be set at a fixed percentage profit over and above her cost of production. This seems to represent a:
A) cost-based pricing strategy.
B) supply and demand formula.
C) demand-based pricing strategy.
D) price leadership pricing strategy.

Accepted Answer

The contract calls for the final price to be set at a fixed percentage profit over and above Jian's cost of production, indicating a cost-based pricing strategy.

Question 6

From a marketing management perspective, what is the meaning of a total product offer? What are the important elements in the total product offer of your college or university?

Accepted Answer

The answer of From a marketing management perspective, what is...

Question 7

In the fall semester, Alex noticed that the plastic cola bottles in the vending machines at his university had changed shape. Upon further investigation, he realized that each bottle contained 2 ounces less beverage than previous bottles, even though he paid the same price as last semester. The pricing objective of the beverage company is to:
A) increase profits by reducing the amount provided in each bottle.
B) build traffic at the vending machines by changing the shape of the bottle.
C) undercut the competition by changing the shape of the bottle.
D) increase market share by reducing the amount provided in each bottle.

Accepted Answer

The fact that the company reduced the amount of beverage in each bottle while keeping the price unchanged suggests that their objective was to increase profits. This can be achieved by reducing costs, and in this case, reducing the amount of beverage in each bottle. Therefore, the pricing objective of the beverage company is to increase profits by reducing the amount provided in each bottle.

Question 8

What is a brand? What is a brand name? What is meant by brand equity?

Accepted Answer

The answer of What is a brand? What is a...

Question 9

Mini-Case
Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked). Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product.
-Gourmet Pets hopes to use its special packaging and extensive advertising to create a perception in the minds of consumers that Prime Cuts is a superior product, even though the actual quality of meat used in the product is virtually no different from competing brands. The company is attempting to develop:
A) differential segmentation.
B) cognitive dissonance.
C) product differentiation.
D) pioneer marketing.

Accepted Answer

Gourmet Pets is attempting to create a perception of differentiation through its special packaging and advertising, even though the actual quality of meat used in the product is virtually the same as competing brands. This is an example of product differentiation.

Question 10

Mini-Case
Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked). Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product.
-Gourmet Pets is interested in computing the break-even point for its new product Prime Cuts. The fixed costs of adding this product to the product line amounts to $20,000. Variable costs to produce one package of Prime Cuts are $2. Prime Cuts will sell for $6 per package. The break-even point would be:
A) 900 units.
B) 2,800 units.
C) 5,000 units.
D) There is not enough information to find the correct answer.

Accepted Answer

The answer of Mini-Case
Gourmet Pets is an innovative competitor in...

Question 11

Angie owns a small company that markets high-quality office supplies to businesses. Angie faces stiff competition from some much larger firms like Office Depot. Which of the following competitive strategies would probably work best for Angie?
A) Keep costs as low as possible by offering a no-frills approach with little or no extra services.
B) Develop a skimming pricing strategy.
C) Utilize a high-low approach to pricing with a higher break-even point.
D) Focus on nonprice competition by offering better service with customers and work on building good customer relationships.

Accepted Answer

Since Angie's company is competing with larger firms, it may not be possible to compete on price alone. Therefore, focusing on nonprice competition by offering better service, building strong customer relationships, and providing value-added services can help distinguish the company from its competitors. This can be a sustainable competitive advantage for the company, leading to increased customer loyalty and repeat business.

Question 12

Consumer goods and services are generally classified into four specific categories. What are the four categories, and how do they differ? Illustrate by giving examples of products that are often included in each category.

Accepted Answer

The answer of Consumer goods and services are generally classified...

Question 13

Felicia wants to know how many units she must sell to cover all of her costs. She indicates to you that her selling price is $20 per unit, her fixed costs are $6,000, and the variable costs per unit are $15. What is her break-even point?
A) 300 units
B) 400 units
C) 1,200 units
D) 1,100 units

Accepted Answer

The answer of Felicia wants to know how many units...

Question 14

Operating in the southwestern states, Lancer Airlines hopes to avoid entering the price war that currently is taking place between several airlines on the east coast. The best strategy to avoid severe price competition is to:
A) provide frequent travelers the added value of special fringe benefits.
B) cut costs and services in order to maintain profit margins.
C) reduce flights and in-flight services, and lay off employees.
D) determine the break-even price and charge slightly more than that.

Accepted Answer

Providing frequent travelers with special fringe benefits, such as free upgrades or priority boarding, can differentiate Lancer Airlines from its competitors and create customer loyalty. This will allow the company to maintain its pricing without having to engage in price wars. Cutting costs and services, reducing flights and in-flight services, and charging slightly more than the break-even price are all short-term solutions that could harm the company's reputation and customer base in the long run.

Question 15

Discuss the role of packaging in a firm's total product offer.

Accepted Answer

The answer of Discuss the role of packaging in a...

Question 16

What does a break-even point of 100 units mean to a firm?
A) The firm must sell 100 units to maximize its profits.
B) Fixed costs plus variable costs equals 100 units.
C) By producing 100 units, the firm can ensure that variable costs completely cancel its fixed costs.
D) If the firm sells 100 units, its total revenues will equal its total costs.

Accepted Answer

If the break-even point of 100 units is reached, the firm's total revenues will equal its total costs, meaning that the firm will neither make a profit nor incur a loss.

Question 17

Helen is considering adding a rack of greeting cards to her product offerings at Litton Books Unlimited. Her fixed costs associated with adding the greeting cards would be $300. Variable costs per card are $1 each. The greeting cards will sell for $2 each. Helen's break-even point would occur at ________ cards sold.
A) 125
B) 150
C) 300
D) 600

Accepted Answer

The answer of Helen is considering adding a rack of...

Quiz 14: Developing and Pricing Goods and Services

Jian has entered into a contract with the federal government to design a computer simulation model for training helicopter pilots. The contract calls for the final price to be set at a fixed percentage profit over and above her cost of production. This seems to represent a:

From a marketing management perspective, what is the meaning of a total product offer? What are the important elements in the total product offer of your college or university?

What is a brand? What is a brand name? What is meant by brand equity?

Angie owns a small company that markets high-quality office supplies to businesses. Angie faces stiff competition from some much larger firms like Office Depot. Which of the following competitive strategies would probably work best for Angie?

Consumer goods and services are generally classified into four specific categories. What are the four categories, and how do they differ? Illustrate by giving examples of products that are often included in each category.

Felicia wants to know how many units she must sell to cover all of her costs. She indicates to you that her selling price is $20 per unit, her fixed costs are $6,000, and the variable costs per unit are $15. What is her break-even point?

Operating in the southwestern states, Lancer Airlines hopes to avoid entering the price war that currently is taking place between several airlines on the east coast. The best strategy to avoid severe price competition is to:

Discuss the role of packaging in a firm's total product offer.

What does a break-even point of 100 units mean to a firm?