Question 1

A producer sells an item to a wholesaler for $4.00,and the wholesaler uses a markup of 25 percent on its selling price and the retailer uses a markup of 30 percent on its selling price.What will be the retailer's selling price to its customers?
A) $7.61
B) $7.55
C) $7.36
D) $7.24
E) $7.12

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. Next, this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 2

A firm with a stockturn rate of 5 that sells products that cost it $150,000 per year is keeping an average of _____ worth of inventory.
A) $75,000
B) $150,00
C) $750,000
D) $4,000
E) $30,000

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year. A stockturn rate of 5 implies that the firm requires only $30,000 worth of inventory (150,000/5).

Question 3

A markup chain:
A) only applies to consumer products, not to business products.
B) implies that a retailer must always apply a smaller markup than a wholesaler.
C) causes lower prices in longer channel systems.
D) determines the price structure in a channel of distribution.
E) None of these alternatives is correct.

Accepted Answer

A markup chain determines the price structure in the whole channel.

Question 4

Blue Ridge Weavers wants to set its selling price on an item so that the retail list price will be $50-taking into account the usual markups of 10 percent at wholesale and 30 percent at retail.At what price should Blue Ridge Weavers sell the item?
A) $32.50
B) $31.50
C) $35.00
D) $34.00
E) $38.00

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. Next, this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 5

Which of the following is a TRUE statement about markups?
A) A firm can lose money even when using a high markup.
B) Markup percents are computed as a percent of the cost of the product.
C) It's easier for a producer to administer the prices consumers pay for products if the markup used varies from one intermediary to the next.
D) The lower the markup, the lower the profit.
E) None of these statements about markups is true.

Accepted Answer

A high markup may result in a price that's too high, a price at which few customers will buy. So high markups may lead to low profits.

Question 6

Gross margin is expressed as ______.
A) gross sales minus accounts receivable
B) net sales minus contribution margin
C) net margin minus sales and operating expenses
D) net sales minus administrative expenses
E) net sales minus cost of goods sold

Accepted Answer

The gross margin is the amount left, after subtracting the cost of sales (cost of goods sold) from net sales, to cover the expenses of selling products and operating the business.

Question 7

"Stockturn rate" means:
A) the number of days required to sell a given output of products.
B) the amount of time needed to sell every item in a retailer's inventory.
C) the number of times the average inventory is sold in a year.
D) the rate at which products enter and leave an intermediary's establishment.
E) None of these is a good definition of "stockturn rate."

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year.

Question 8

A producer makes an item for $32 and sells it with a 50 percent markup to a wholesaler.The wholesaler then applies a 20 percent markup.A retailer then uses a 60 percent markup.The final retail selling price is:
A) $200.00.
B) $73.60.
C) $64.00.
D) $80.00.
E) Cannot be determined without stockturn information.

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. And this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 9

A large supermarket chain purchases a box of cereal from a food wholesaler.If the supermarket chain uses a markup of 20 percent on its selling price of $2.85,what is the price the supermarket chain paid the food wholesaler?
A) $2.12
B) $2.28
C) $2.45
D) $2.55
E) $2.67

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. Next, this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 10

High markups on a product could lead to low profits when ______.
A) competitors have higher markups
B) there are no substitutes
C) demand is inelastic
D) sales dip due to high prices
E) supply is inelastic

Accepted Answer

A high markup may result in a price that's too high, a price at which few customers will buy. So high markups may lead to low profits.

Question 11

High Meadow Mfg.Co.sold its product through wholesalers and retailers-allowing the wholesalers a markup of 25 percent and retailers a markup of 40 percent.If the retail selling price is $100 and the manufacturer's cost is $30,what markup in dollars did High Meadow receive on the sale of this product?
A) $5.00
B) $13.50
C) $15.00
D) $10.00
E) $20.00

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. Next, this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 12

The sequence of markups firms use at different levels in a channel is referred to as a ______.
A) market sequence
B) markup chain
C) markup margin
D) standard markup
E) markup channel

Accepted Answer

A markup chain is the sequence of markups firms use at different levels in a channel.

Question 13

The number of times an intermediary's average inventory is sold in a year is called the:
A) stockturn rate.
B) asset factor.
C) inventory ratio.
D) markup ratio.
E) ROI (return on inventory).

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year.

Question 14

An intermediary seeking high profits should ______.
A) use the lowest markup that will still cover selling expenses
B) use price lining
C) use high markups
D) choose the markup which maximizes turnover
E) try to find the markup level related to the most profitable price

Accepted Answer

A high markup may result in a price that's too high, a price at which few customers will buy. You can't earn much if you don't sell much, no matter how high your markup on a single item. So high markups may lead to low profits. Instead, try to find the markup level related to the most profitable price.

Question 15

TopKnotch Mfg.Co.has a production cost of $280.It sells its product to a wholesaler for $400.The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000.Which of the following is true about this "markup chain?"
A) The wholesaler's markup is 25 percent.
B) The manufacturer is taking a markup of 30 percent.
C) The retailers' markup is 100 percent.
D) None of these alternatives is true for this markup chain.

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. Next, this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 16

The production cost of an automobile component is $45.The producer takes a 10 percent markup and sells the product to the wholesaler.What is the wholesaler's cost?
A) $45
B) $5
C) $10
D) $50
E) $60

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. Next, this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 17

It costs a producer $400 to manufacture a product that is distributed through wholesalers and retailers.The markups at the producer,wholesaler,and retailer levels are 20%,20% and 50%,respectively.The wholesaler's selling price for the product is __________,and the retailer's selling price is ___________.
A) $625; $1250
B) $576; $864
C) $480; $576
D) $500; $625
E) Cannot be determined from the information provided

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. And this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 18

Wilson sells a basketball to a wholesaler for $16,and the wholesaler applies a 20 percent markup.A retailer then applies a 33.3 percent markup.The final selling price is:
A) $24.53.
B) $30.00.
C) $25.59.
D) $28.00.
E) Cannot be determined from the information given.

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. And this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Question 19

The stockturn rate is ______.
A) the firm's ability to meet its short-term financial obligations
B) the number of days that credit sales remains in receivables
C) the number of times the average inventory is sold in a year
D) the difference between net sales and cost of goods sold
E) the ratio of sales to inventory

Accepted Answer

The stockturn rate is the number of times the average inventory is sold in a year.

Question 20

A producer sells an item to a wholesaler for $4.00,and the wholesaler uses a markup of 25 percent on its selling price.What will be the cost to the retailer?
A) $4.75
B) $4.87
C) $5.03
D) $5.33
E) $5.45

Accepted Answer

A producer's selling price becomes the cost the wholesaler pays. The wholesaler's selling price becomes the retailer's cost. Next, this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit.

Quiz 20: Price Setting in the Business World

A producer sells an item to a wholesaler for $4.00,and the wholesaler uses a markup of 25 percent on its selling price and the retailer uses a markup of 30 percent on its selling price.What will be the retailer's selling price to its customers?

A firm with a stockturn rate of 5 that sells products that cost it $150,000 per year is keeping an average of _____ worth of inventory.

A markup chain:

Blue Ridge Weavers wants to set its selling price on an item so that the retail list price will be $50-taking into account the usual markups of 10 percent at wholesale and 30 percent at retail.At what price should Blue Ridge Weavers sell the item?

Which of the following is a TRUE statement about markups?

Gross margin is expressed as ______.

"Stockturn rate" means:

A producer makes an item for $32 and sells it with a 50 percent markup to a wholesaler.The wholesaler then applies a 20 percent markup.A retailer then uses a 60 percent markup.The final retail selling price is:

A large supermarket chain purchases a box of cereal from a food wholesaler.If the supermarket chain uses a markup of 20 percent on its selling price of $2.85,what is the price the supermarket chain paid the food wholesaler?

High markups on a product could lead to low profits when ______.

The sequence of markups firms use at different levels in a channel is referred to as a ______.

The number of times an intermediary's average inventory is sold in a year is called the:

An intermediary seeking high profits should ______.

TopKnotch Mfg.Co.has a production cost of $280.It sells its product to a wholesaler for $400.The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000.Which of the following is true about this "markup chain?"

The production cost of an automobile component is $45.The producer takes a 10 percent markup and sells the product to the wholesaler.What is the wholesaler's cost?

It costs a producer $400 to manufacture a product that is distributed through wholesalers and retailers.The markups at the producer,wholesaler,and retailer levels are 20%,20% and 50%,respectively.The wholesaler's selling price for the product is ,and the retailer's selling price is _.

Wilson sells a basketball to a wholesaler for $16,and the wholesaler applies a 20 percent markup.A retailer then applies a 33.3 percent markup.The final selling price is:

The stockturn rate is ______.

A producer sells an item to a wholesaler for $4.00,and the wholesaler uses a markup of 25 percent on its selling price.What will be the cost to the retailer?