Question 1

The federal government often uses ____ pricing when it grants defense contracts.
A) markup
B) differential
C) breakeven
D) cost-plus
E) competition-based

Accepted Answer

The term "cost-plus" refers to a type of pricing method where the contractor is paid for all costs incurred during the project, plus a predetermined profit margin. This is commonly used in government contracts related to defense, as the government wants to ensure that the contractor is able to cover all costs associated with the project, while also incentivizing efficiency and cost savings.

Question 2

Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway most likely use for these pianos?
A) Markup
B) Competition-based
C) Cost-plus
D) Demand-based
E) Secondary-market

Accepted Answer

The answer of Steinway produces concert grand pianos, often using...

Question 3

Kohl's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____ percent for this product.
A) 64
B) 36
C) 18
D) 57
E) 45

Accepted Answer

Markup as a percentage of cost can be calculated using the formula:
(markup/cost) x 100%

Here, markup = selling price - cost = $25.95 - $16.50 = $9.45
cost = $16.50

So, markup as a percentage of cost = (9.45/16.50) x 100% = 57.27% (approx)

Therefore, the closest answer choice is D) 57.

Question 4

A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?
A) 3 percent
B) 14.3 percent
C) 30 percent
D) 70 percent
E) 20 percent

Accepted Answer

Markup as a percentage of selling price can be calculated as [(Selling price - Cost price)/Selling price] x 100. In this case, markup = [(2.00-1.40)/2.00] x 100 = 30%. Therefore, the correct answer is C.

Question 5

Wet Seal, a retailer of swimwear, employs a commonly used cost-based pricing method called
A) value pricing.
B) cost-plus pricing.
C) cost discounting.
D) differential pricing.
E) markup pricing.

Accepted Answer

The answer of Wet Seal, a retailer of swimwear, employs...

Question 6

Markup is measured either as a percentage of ____ or a percentage of ____.
A) selling price; cost
B) cost; profit
C) revenue; contribution margin
D) resources used; cost
E) demand; competition

Accepted Answer

Markup is essentially the difference between the cost of producing and selling a product or service and the final selling price. Therefore, the two most common ways of measuring markup are as a percentage of the selling price or a percentage of the cost. Option A is the correct choice as it provides both of these options.

Question 7

If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ____ pricing method.
A) cost-plus
B) competition-based
C) psychological
D) comparison
E) demand-based

Accepted Answer

This scenario describes the use of demand-based pricing method, where the company sets a price based on the demand for the product to reach its sales goal. The price is set in such a way that it corresponds to the number of units that the company wants to sell, without regard to costs or competition.

Question 8

During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of
A) differential pricing.
B) incentives.
C) competition-based pricing.
D) demand-based pricing.
E) random discounting.

Accepted Answer

The answer of During July and August, Lakewood Links Golf...

Question 9

If PepsiCo sets its twelve-pack price to match the price charged by Coca-Cola, Pepsi is using which of the following pricing methods?
A) Demand-based
B) Cost-based
C) Reference pricing
D) Competition-based
E) Price leader

Accepted Answer

PepsiCo is using competition-based pricing by matching the price charged by Coca-Cola. This is a common strategy used by companies to stay competitive in the market.

Question 10

When products in an industry are relatively homogeneous and price is a key purchase consideration,
A) competition-based pricing becomes more important.
B) demand-based pricing dominates pricing decisions.
C) firms tend to use secondary-market pricing.
D) cost-based methods like markup pricing are dominant.
E) customary pricing is often used.

Accepted Answer

When products in an industry are relatively homogeneous and price is a key purchase consideration, competition-based pricing becomes more important. This is because customers are unlikely to pay a premium for any one brand and will therefore choose the cheapest option available. In this context, firms need to be aware of their competitors' pricing strategies and adjust their own pricing accordingly in order to remain competitive.

Question 11

Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel, which illustrates ____ pricing. The second is to price its train tickets so that the further away the travel date, the greater the discount, which is best described as ___
A) demand-based; secondary market pricing.
B) demand-based; differential pricing.
C) demand-based; periodic discounting.
D) cost-plus; secondary markup.
E) cost-plus; periodic discounting.

Accepted Answer

The first pricing strategy, where train tickets are priced less expensive on weekends than weekdays, is an example of demand-based pricing where Amtrak is trying to attract more customers on low-demand days by lowering the price. The second pricing strategy, where the further away the travel date, the greater the discount, is best described as differential pricing where Amtrak is offering different prices for the same service based on the time of booking. Therefore, option B - demand-based; differential pricing - is the most appropriate answer.

Question 12

When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using ____ pricing.
A) markup
B) demand-based
C) differential
D) cost-plus
E) expensed-based

Accepted Answer

The given scenario is describing cost-plus pricing, in which the seller determines the cost of the product and then adds a certain percentage or amount to that cost to set the price. Therefore, the best choice is option D - cost-plus pricing.

Question 13

For custom-made equipment or commercial construction projects, which pricing method is most likely used?
A) Prestige
B) Premium
C) Differential
D) Return-on-investment
E) Cost-plus

Accepted Answer

Cost-plus pricing is commonly used for custom-made equipment or commercial construction projects. This method calculates the cost of production plus a markup for profit. It ensures that the manufacturer or contractor is compensated for all expenses incurred during the project, including materials, labor, and overhead costs.

Question 14

If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.
A) markup
B) demand-based
C) competitive
D) peak
E) differential

Accepted Answer

The description matches demand-based pricing which determines the price based on the level of demand for the product. The other options are: A) markup pricing sets a fixed percentage of profit for the seller; C) competitive pricing sets the price based on competitors' prices; D) peak pricing increases the price during high-demand periods; and E) differential pricing sets different prices based on customer segments.

Question 15

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using ________
A) price fixing; which considers competition to be less important than costs.
B) price fixing; which considers costs to be less important than competitor's prices.
C) market share pricing; which considers competition to be the ultimate pricing goal.
D) competition-based pricing, which considers profit to be the ultimate pricing goal.
E) competition-based pricing, which considers costs to be less important than competitor's prices.

Accepted Answer

Competition-based pricing strategy involves setting prices based on competitors' strategies, prices, costs, and market offerings. In this scenario, Shell is using competition-based pricing by primarily looking at BP stations' prices to determine its own, indicating that it considers competitors' prices more important than its own costs.

Question 16

Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of
A) secondary-market pricing.
B) price skimming.
C) periodic discounting .
D) captive pricing.
E) random discounting.

Accepted Answer

Secondary-market pricing involves setting different prices for the same product in different markets or segments, such as pricing Lexus cars differently in the U.S. and Japan.

Question 17

Which of the following statements about markup pricing is correct?
A) The use of similar markups reduces price competition.
B) Markup pricing is inconvenient to use.
C) Markup pricing results in a high price when demand is high and a low price when demand is low.
D) Markup pricing is a demand-based pricing method.
E) Using markups makes pricing a time-consuming, difficult process.

Accepted Answer

The use of similar markups reduces price competition as it ensures that competitors are charging similar prices for similar products. This allows companies to maintain reasonable profit margins without being undercut by their competitors.

Question 18

Competition-based pricing is
A) used when costs and revenues are secondary to competitors' prices.
B) not useful as a method of increasing market share.
C) not useful if the competing products are homogeneous.
D) not able to increase sales.
E) used when competing products are heterogeneous.

Accepted Answer

Competition-based pricing is a pricing strategy in which a company sets their prices based on the prices of its competitors rather than its own cost and revenue. Therefore, option A is correct as it states that costs and revenues are secondary to competitors' prices. Option B is incorrect as competition-based pricing can be used as a method of increasing market share. Option C is incorrect as it is useful even if the competing products are homogeneous. Option D is incorrect as this pricing strategy aims to increase sales. Option E is partially correct as competition-based pricing can be used when competing products are heterogeneous or similar.

Question 19

When determining markup as a percentage of cost, divide the markup amount by
A) price.
B) cost.
C) quantity.
D) revenue.
E) 100.

Accepted Answer

Markup as a percentage of cost is calculated by dividing the markup amount by the cost of the item being sold.

Question 20

The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.
A) price-line
B) promotional
C) professional
D) differential
E) psychological

Accepted Answer

The fact that senior citizens are charged a different (lower) price than younger adults is an example of differential pricing, which is when different customers or customer groups are charged different prices for the same product or service. In this case, the price difference is based on age, which is one factor in determining a customer's willingness and ability to pay.

Quiz 12: Pricing Concepts and Management

The federal government often uses ____ pricing when it grants defense contracts.

Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway most likely use for these pianos?

Kohl's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____ percent for this product.

A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?

Wet Seal, a retailer of swimwear, employs a commonly used cost-based pricing method called

Markup is measured either as a percentage of or a percentage of .

If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ____ pricing method.

During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of

If PepsiCo sets its twelve-pack price to match the price charged by Coca-Cola, Pepsi is using which of the following pricing methods?

When products in an industry are relatively homogeneous and price is a key purchase consideration,

When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using ____ pricing.

For custom-made equipment or commercial construction projects, which pricing method is most likely used?

If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using ________

Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of

Which of the following statements about markup pricing is correct?

Competition-based pricing is

When determining markup as a percentage of cost, divide the markup amount by

The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.