Question 1

Variable costs for a pizza parlour would include the cost of the insurance, rent, and property taxes.

Accepted Answer

Variable costs are costs that change based on the level of production or sales, such as the cost of ingredients, labor, and utilities. Insurance, rent, and property taxes are generally fixed costs that do not vary with production or sales. Therefore, they are not considered variable costs.

Question 2

Cost-based pricing is the most popular method of fixed margin pricing.

Accepted Answer

Cost-based pricing involves setting a price based on the cost of producing or acquiring the product, plus a fixed margin or profit. This is a common method of pricing, especially for businesses that have a good understanding of their costs and want to ensure that they are making a profit on each sale.

Question 3

The prices quoted on the menu of an upscale restaurant all end in zeros. This approach is a way the restaurant can signal to its customers that the food it serves is a real bargain.

Accepted Answer

The statement is false. Prices ending in zeros are often associated with luxury and high-priced items, not bargains. Furthermore, customers may perceive this pricing strategy as pretentious or disingenuous, rather than a signal of value.

Question 4

A drawback of demand-based pricing is that it is less market focused than cost-based pricing.

Accepted Answer

Demand-based pricing is actually more market-focused than cost-based pricing. Cost-based pricing is focused primarily on covering the costs of production and achieving a certain profit margin, while demand-based pricing takes into account how much the market is willing to pay for a product or service. By adjusting prices according to demand, companies can capture more revenue and profits, which ultimately benefits the market as a whole.

Question 5

Fixed costs are those costs companies incur regardless of the number of units sold.

Accepted Answer

Fixed costs do not vary with changes in the number of units sold, they are incurred whether or not any sales are made. Examples of fixed costs include rent, salaries, and insurance premiums.

Question 6

Which of the following are marketing intermediaries that sell directly to final consumers?

Accepted Answer

Retailers sell directly to final consumers. Distributors, truck jobbers, and wholesalers are intermediaries that sell to other businesses.

Question 7

What is the main distinction among members of a channel of distribution?

Accepted Answer

The main distinction among members of a channel of distribution is whether they are wholesalers or retailers. Wholesalers are the intermediaries who buy products in large quantities from producers and sell them to retailers or other businesses, while retailers are the intermediaries who sell products directly to consumers. Other types of members in a channel of distribution, such as agents, brokers, shippers, and warehousers, are secondary distinctions and may overlap with the roles of wholesalers and retailers.

Question 8

Which of the following provides customer satisfaction by converting inputs into finished products?

Accepted Answer

Form utility is the process of converting raw materials, components, and other inputs into finished products that meet customer needs and expectations, thus providing customer satisfaction. A merchant wholesaler and a retailer are both intermediaries that facilitate the transfer of goods from producers to consumers, but they do not necessarily directly create form utility. Ownership utility is the benefit that comes from transferring ownership of a product from one party to another, and does not directly relate to the production process.

Question 9

The practice of ending prices in numbers below even dollars and cents is intended to create a perception of greater value.

Accepted Answer

This practice, called "Charm Pricing," is based on the psychological phenomenon known as the "left-digit effect," where consumers perceive prices ending in 9 to be significantly lower than the next whole dollar amount. As a result, marketers use this pricing strategy to create the perception of a better deal or value for consumers.

Question 10

Variable costs are those expenses that change as the level of production changes.

Accepted Answer

Variable costs are costs that vary with the level of production or sales. These costs increase as the production or sales increase and decrease as the production or sales decrease. Examples of variable costs include direct labor, raw materials, and sales commissions.

Question 11

Which two key elements is a firm's distribution strategy concerned with?

Accepted Answer

A firm's distribution strategy is concerned with the channel of distribution, which is the path through which goods and services travel from the producer to the end user, and physical distribution, which involves the activities related to the movement and storage of products such as transportation, warehousing, and inventory management.

Question 12

Which of the following adds value by making it easier for customers to actually possess the goods and services that they purchase?

Accepted Answer

Ownership utility adds value by making it easier for customers to possess the goods and services they purchase, through measures such as convenient payment options, delivery services, and after-sale support.

Question 13

Which of the following satisfies customer needs by providing the right products in the right place?

Accepted Answer

Place utility is the concept of satisfying customer needs by providing the right products in the right place. Value stream mapping is a method for identifying and improving processes in a business, while contingency planning is a process for preparing for potential emergencies or unexpected events. Distribution utility refers to the efficiency and effectiveness of a company's distribution network, but it does not specifically relate to satisfying customer needs through product placement. Therefore, C is the best choice as it directly addresses the given question.

Question 14

The Alpine Shop is a store that specializes in selling equipment for camping and other outdoor activities. The store has many employees who love to camp, hike, hunt, and fish. These employees often go out of their way to provide honest and helpful advice about the good and bad features of the products they sell. Which type of utility is created by the efforts of these employees?

Accepted Answer

The efforts of the employees to provide honest and helpful advice about the products they sell create information utility, as they are providing relevant information to customers that can help them make informed decisions about which products to purchase.

Question 15

What is a channel of distribution?

Accepted Answer

A channel of distribution refers to the network of organizations and processes that link producers to consumers. This includes all the intermediary organizations that physically handle products as they move from producers to consumers. Option A is only referring to physical handlers, while option B is only referring to agents and brokers. Option C is only referring to various promotional methods used to reach consumers.

Question 16

Profit margin is the gap between the cost and the price of an item on a per product basis.

Accepted Answer

Profit margin is calculated by subtracting the cost of a product from its selling price, and is expressed as a percentage or a dollar amount per unit. Therefore, it is the gap between cost and price on a per product basis.

Question 17

What is the goal of distribution strategy?

Accepted Answer

The goal of distribution strategy is to ensure that the right product is delivered to the right customer at the right place and time. This involves determining the most efficient and effective channels and methods for delivering the product to the target market.

Question 18

People magazine incurs salaries for reporters and photographers as fixed costs regardless of how many magazines are sold.

Accepted Answer

Fixed costs are costs that do not change with the level of sales or production, so salaries for reporters and photographers would be considered fixed costs for People magazine.

Question 19

What is something that a one-hour photo shop, a drive-up window at a fast food restaurant, and a vending machine all have in common?

Accepted Answer

These services all provide time utility by making products available when consumers want them, enhancing convenience and reducing wait times.

Question 20

Your local video store charges $39.99 instead of $40.00 for a video game. This store is using a strategy known as penny-less pricing.

Accepted Answer

The strategy is known as "psychological pricing" or "charm pricing," not "penny-less pricing."

Quiz 12: Distribution and Pricing: Right Product, Right Person, Right Place, Right Price