Question 1

If the book sellerChapters decides to divides its market area into segments or regions and charge a flat rate for freight to all customers in a given region, which type of pricing is the company using?
A)zone
B)uniform delivered
C)FOB origin
D)basing point

Accepted Answer

A zone pricing strategy involves dividing a market area into regions and charging a flat freight rate to all customers in each region. This strategy is commonly used by companies selling heavy or bulky products, like Chapters, because shipping costs can vary widely depending on the distance between the company's warehouse and the customer's location. By grouping customers into regions and charging a flat rate, Chapters can simplify its pricing structure and make it easier for customers to understand the cost of shipping.

Question 2

What does uniform delivered pricing enable a firm to do?
A)to charge each customer the actual cost of shipping its products
B)to stir up price competition between buyers
C)to maintain a nationally advertised price
D)to charge each customer its fair share of the cost of shipping

Accepted Answer

Uniform delivered pricing allows a firm to maintain a nationally advertised price, meaning that customers in different locations will pay the same price for a product regardless of the cost of shipping. This helps the firm to avoid price competition between buyers and enables it to maintain consistent pricing that is easier to communicate to customers.

Question 3

Ray and Wes are brothers. They both decided to purchase identical bowling shoes. The brothers live on opposite ends of Canada. However upon purchase, the online retailer charged them a flat freight charge. When does this usually occur?
A)when using uniform delivered pricing
B)when using zone pricing
C)when using FOB origin pricing
D)when using freight absorption pricing

Accepted Answer

Flat freight charges usually occur when using uniform delivered pricing, which means that the shipping cost is the same no matter where the item is being sent. In this case, the online retailer charged Ray and Wes the same freight charge even though they live on opposite ends of Canada.

Question 4

If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased, which type of pricing is it using?
A)quantity discount
B)freight absorption
C)uniform delivered
D)FOB origin

Accepted Answer

The type of pricing being used in the scenario is uniform delivered pricing, where the freight charges are based on the total dollar amount of merchandise purchased and are the same for all customers regardless of their location.

Question 5

The Dollar Store is a chain of retail stores where all of the merchandise is priced at $1. The Dollar Store uses which of the following?
A)a single-price tactic
B)flexible pricing
C)price lining
D)price bundling

Accepted Answer

The Dollar Store uses a single-price tactic where all merchandise is priced at $1.

Question 6

This tactic allows different customers to pay different prices for essentially the same merchandise bought in equal quantities. It is often found in the sale of shopping goods, specialty merchandise, and most industrial goods except supply items. What is this tactic called?
A)zoning (or basing) pricing
B)price maintenance
C)psychological (or odd-even) pricing
D)flexible (or variable) pricing

Accepted Answer

This tactic is called flexible (or variable) pricing, where customers pay different prices for essentially the same merchandise bought in equal quantities.

Question 7

What is FOB an acronym for?
A)free on board
B)fee on buyer
C)first buyer
D)freight on board

Accepted Answer

FOB stands for "free on board", which means the seller is responsible for the product until it is loaded onto the shipping vessel. After that, the buyer becomes responsible for the product.

Question 8

Donegal Sweaters, a company that manufactures farm style wool sweaters, has designated a shipping point from which to calculate all freight charges. It then charges its customers the freight costs from that point (even if the goods were shipped from another location). Which type of pricing is Donegal Sweaters using?
A)freight absorption
B)uniform delivered
C)zone
D)basing-point

Accepted Answer

Donegal Sweaters is using basing-point pricing, as it designates a shipping point from which all freight charges are calculated, regardless of where the goods are actually shipped from.

Question 9

What is uniform delivered pricing also known as?
A)one pricing
B)postage stamp pricing
C)calculated pricing
D)regional pricing

Accepted Answer

Uniform delivered pricing is also known as postage stamp pricing. It refers to a pricing strategy where the same price is charged for shipping a product to any destination within a particular region or country. This helps to simplify the pricing process for both the seller and the buyer, as there are no complex calculations based on distance or location.

Question 10

In a catalogue targeted to people who like to bake, customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50. What is this an example of?
A)price bundling
B)psychological pricing
C)penetration pricing
D)basing-point bundling

Accepted Answer

This is an example of price bundling as customers are given the option to purchase a single item or multiple items at a discounted bundle price.

Question 11

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. Which pricing does the manufacturer use?
A)FOB origin
B)uniform delivered
C)basing-point
D)freight absorption

Accepted Answer

The manufacturer uses basing-point pricing, which means charging freight from a specific point (in this case, the closest warehouse), regardless of the actual shipping origin.

Question 12

Manjeet was interested in purchasing a Barbour jacket from J.Crew in the United States. However, once Manjeet was informed that she would be required to absorb the freight costs from the shipping point, she changed her mind. What is this price tactic called?
A)zone pricing
B)uniform delivered pricing
C)freight absorption pricing
D)FOB origin pricing

Accepted Answer

This pricing tactic is called FOB origin pricing, which means that the buyer is responsible for paying the freight costs from the shipping point.

Question 13

An Ontario-based catalogue retailer sells fireplace equipment. Its customers in Ontario are charged one shipping rate, and customers west of the Rockies are charged a different rate. Customers in the Maritime provinces are charged yet another rate. What kind of geographic pricing is the catalogue retailer using?
A)FOB origin pricing
B)zone pricing
C)freight absorption pricing
D)uniform delivered pricing

Accepted Answer

The catalogue retailer is using zone pricing, where they divide customers into different zones based on their geographic location and charge different shipping rates accordingly.

Question 14

If the seller pays all or part of the actual freight charges and does not pass them on to the buyer, which type of pricing is the seller using?
A)freight absorption
B)uniform delivered
C)zone
D)basing point

Accepted Answer

When the seller pays all or part of the actual freight charges and does not pass them on to the buyer, it is called freight absorption pricing.

Question 15

Shipping fresh-cut flowers to international buyers can be risky because of price changes during the time required for shipment, expense incurred over long distances, and quality of product delivered. To minimize risks and costs, what would a seller likely employ?
A)freight absorption pricing
B)zone pricing
C)basing-point pricing
D)FOB origin pricing

Accepted Answer

FOB origin pricing is the most appropriate choice for shipping fresh-cut flowers to international buyers. FOB (Free on Board) origin pricing transfers ownership and responsibility to the buyer as soon as the goods leave the seller's warehouse. The buyer then bears the risk of any price changes, expenses incurred during shipment, and potential quality issues. This pricing strategy reduces the seller's risk and cost and allows them to focus on delivering high-quality products to their buyers.

Question 16

Landover Arms Inc. currently markets its rifles designed for competitive shooting in the Ontario market. It would like to expand into the western market, but the competition there is intense. Which geographic pricing tactic should the firearms manufacturer use?
A)zone pricing
B)freight absorption pricing
C)basing-point pricing
D)multiple unit pricing

Accepted Answer

Freight absorption pricing can be an effective strategy for Landover Arms Inc. to penetrate the competitive western market. By absorbing the shipping costs, the company can offer its rifles at more competitive prices without altering the list price, making its products more appealing to buyers in new geographic areas despite the intense competition. This approach can help offset the disadvantage of geographical distance to the western market.

Question 17

What is the basic assumption behind value-based pricing?
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.

Accepted Answer

Value-based pricing assumes that the firm is customer-driven and competitor-driven, meaning that the price is determined by the perceived value of the product or service in comparison to competitors. This approach focuses on maximizing profitability by capturing the value created for customers, rather than setting prices based on production costs or profit margins. Option A is incorrect, as value-based pricing is centered around customer needs and values, rather than sales goals. Option C is unrelated to value-based pricing, and option D directly contradicts its main assumption by emphasizing price over quality.

Question 18

Quart jars of Dancing Pig Barbecue Sauce, produced in British Columbia, are sold through the mail. The company uses two different shipping prices. All customers west of the Fraser River pay $3.99 shipping and handling costs per order, while all east of the Fraser River pay $4.99. Which type of pricing is being used?
A)penetration
B)skimming
C)zone
D)freight absorption

Accepted Answer

The pricing strategy being used is zone pricing, as customers are being charged different shipping costs based on their geographic location (west or east of the Fraser River).

Question 19

Green Earth Marketing sells containers for temporary storage of recyclables nationally through its catalogue. The company wants to simplify pricing and reduce its risk. Green Earth also desires some type of difference in price due to distance. Which type of pricing should the company use?
A)uniform delivered
B)freight absorption
C)flexible
D)zone

Accepted Answer

Zone pricing would allow Green Earth Marketing to simplify its pricing and adjust for distance, without completely absorbing the cost of freight. This would provide some level of risk reduction and pricing flexibility.

Question 20

If an item purchased under FOB origin terms is damaged in truck transit, against whom can the purchaser file its damage claim?
A)against the manufacturer
B)against the common carrier
C)against all of the supply chain members
D)against the driver

Accepted Answer

FOB origin terms indicate that the seller fulfills their obligation by delivering the goods to the carrier, and the buyer assumes responsibility for the goods from that point forward. This means that if the item is damaged during transit, the buyer can file a claim against the common carrier (the party responsible for transporting the goods). It is not appropriate for the buyer to file a claim against the manufacturer, supply chain members, or driver unless they had specific responsibility for causing the damage.

Quiz 13: Setting the Right Price

If the book sellerChapters decides to divides its market area into segments or regions and charge a flat rate for freight to all customers in a given region, which type of pricing is the company using?

What does uniform delivered pricing enable a firm to do?

Ray and Wes are brothers. They both decided to purchase identical bowling shoes. The brothers live on opposite ends of Canada. However upon purchase, the online retailer charged them a flat freight charge. When does this usually occur?

If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased, which type of pricing is it using?

The Dollar Store is a chain of retail stores where all of the merchandise is priced at $1. The Dollar Store uses which of the following?

This tactic allows different customers to pay different prices for essentially the same merchandise bought in equal quantities. It is often found in the sale of shopping goods, specialty merchandise, and most industrial goods except supply items. What is this tactic called?

What is FOB an acronym for?

What is uniform delivered pricing also known as?

In a catalogue targeted to people who like to bake, customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50. What is this an example of?

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. Which pricing does the manufacturer use?

Manjeet was interested in purchasing a Barbour jacket from J.Crew in the United States. However, once Manjeet was informed that she would be required to absorb the freight costs from the shipping point, she changed her mind. What is this price tactic called?

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

Shipping fresh-cut flowers to international buyers can be risky because of price changes during the time required for shipment, expense incurred over long distances, and quality of product delivered. To minimize risks and costs, what would a seller likely employ?

Landover Arms Inc. currently markets its rifles designed for competitive shooting in the Ontario market. It would like to expand into the western market, but the competition there is intense. Which geographic pricing tactic should the firearms manufacturer use?

What is the basic assumption behind value-based pricing?

Green Earth Marketing sells containers for temporary storage of recyclables nationally through its catalogue. The company wants to simplify pricing and reduce its risk. Green Earth also desires some type of difference in price due to distance. Which type of pricing should the company use?

If an item purchased under FOB origin terms is damaged in truck transit, against whom can the purchaser file its damage claim?