Question 1

Amanti Lighting sells a lamp kit for making personalized lighting.The company sells each lamp kit for $22.The average variable cost for each lamp kit is $13,and the total annual fixed costs for plant operation is $78,300.What is the break-even point in units?
A) 8,700
B) 2,237
C) 6,023
D) 3,559

Accepted Answer

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit (selling price per unit minus variable cost per unit). Here, it is $78,300 / ($22 - $13) = 8,700 units.

Question 2

How do shopbots affect pricing strategies?
A) They create inelastic demand.
B) They provide a means for comparison shopping.
C) They create opportunities for prestige pricing.
D) They link manufacturers,suppliers,and customers.

Accepted Answer

Shopbots provide consumers with the ability to easily compare prices across different retailers, making it more difficult for retailers to charge higher prices without losing customers. This can lead to a shift towards more competitive pricing strategies.

Question 3

What is another name for on-line price comparison engines?
A) extranets
B) shopbots
C) price "tickers"
D) virtual spreadsheets

Accepted Answer

On-line price comparison engines are commonly known as shopbots.

Question 4

How can manufacturers regain some control over the price their products are sold for at the retail level?
A) by developing brand loyalty in consumers by delivering low prices
B) by avoiding doing business with price-cutting discounters
C) by outsourcing
D) by using an exclusive computerized inventory system

Accepted Answer

By avoiding doing business with price-cutting discounters, manufacturers can choose to work with retailers who align with their desired pricing strategies, and who are willing to sell their products at a fair price. This allows manufacturers to have more control over the prices at which their products are sold, and can help them maintain higher profit margins.

Question 5

Safeway will place well-known brands on the shelves at high prices while offering its own Safeway brand at lower prices.This practice is an example of which of the following?
A) brand cutting
B) illegal pricing
C) price pressurization
D) selling against the brand

Accepted Answer

This practice is known as "selling against the brand," where a retailer promotes its own store brand as a cheaper alternative to well-known, higher-priced brands. This strategy is used to highlight the value of the store's brand to consumers, encouraging them to purchase it over the more expensive options.

Question 6

When Laser Technology developed and introduced a high-tech crash investigation system to be used by law enforcement officers,the company determined that demand for the product was inelastic,and there was no existing competition.What should be the pricing strategy for the system?
A) low initial price,rising constantly through growth and into maturity
B) high initial price,falling slightly when entering the growth stage
C) high price,continuing through growth and maturity
D) low initial price,rising slightly when entering the growth stage

Accepted Answer

Since the demand is inelastic and there is no competition, a high initial price can be set to maximize profits. As the product enters the growth stage, the price can be slightly reduced to attract more customers and increase market penetration.

Question 7

Ceylon Express sells bottled pasteurized tea to retailers.It has the following revenues and costs:
$\begin{array}{llcc}
  \text { Sales price per bottle: } &\$0.50  \
 \text { Variable costs per bottle: } &\$0.30\
 \text { Total fixed costs (annual): } &\$50,000\
 \text {Tax rate:  } &20 \text { percent }\\

\end{array}$

What is the annual break-even point in unit for the company?
A) 100,000
B) 50,000
C) 250,000
D) 166,667

Accepted Answer

The answer of Ceylon Express sells bottled pasteurized tea to...

Question 8

With respect to pricing,what has retailers' presence on the Internet resulted in?
A) retailers gaining firmer control of market pricing at the expense of the end user
B) the retailers' ability to charge what the market will bear
C) the end user having more ability to comparison shop thus resulting in a larger measure of control over prices charged by retailers
D) vast economies of scale resulting in higher profit margins for retailers

Accepted Answer

Retailers' presence on the Internet has resulted in the end user having more ability to comparison shop thus resulting in a larger measure of control over prices charged by retailers. This is because consumers have access to a wider range of products and prices from different retailers, allowing them to compare and find the best deals. As a result, retailers have to become more competitive with their pricing to attract customers.

Question 9

Entertainment Central makes video game consoles,which it sells for $500.It estimates its variable costs to be $200 per console.It figures its fixed costs to be $600,000 per year.How many consoles does it have to sell to break even?
A) 2,000
B) 2,500
C) 3,000
D) 1,200

Accepted Answer

Break-even point = Fixed costs / (Selling price per unit - Variable cost per unit)= 600,000 / (500 - 200)= 600,000 / 300= 2,000

Question 10

According to the text,which of the following statements about the impact of the Internet on pricing strategy is true?
A) Setting prices on the Internet offers retailers few advantages.
B) One area where the Internet is having a major impact on pricing is the bargaining power between buyers and sellers.
C) The promise of pricing efficiency on the Internet has been realized.
D) Extranets are on-line price-comparison engines.

Accepted Answer

The text states that one area where the Internet is having a major impact on pricing is the bargaining power between buyers and sellers. This suggests that the Internet is impacting the balance between buyers and sellers and therefore their pricing strategies. A, C, and D are not supported by the text.

Question 11

Many consumers,especially when faced with an uncertain purchase decision,think which of the following?
A) A high price is an indication that consumers are being exploited.
B) A high price will always lead to major price discounts to wholesalers and retailers that distribute it.
C) A high price is a signal of quality.
D) A high price is a sign of the company's overall market share.

Accepted Answer

Many consumers associate a high price with higher quality, especially when they are uncertain about the product or brand. This perception is often reinforced by premium pricing strategies used by companies to position their products as high-quality or exclusive. So, option C is the best choice.

Question 12

Which of the following BEST describes selling against the brand?
A) It helps manufacturers gain shelf visibility.
B) It has resulted in manufacturers slowly gaining control of distribution channels.
C) It has resulted in the sales declines of manufacturer brands.
D) It has been a losing battle for private-label brands.

Accepted Answer

Selling against the brand refers to marketing and promoting private-label brands over manufacturer brands, which can result in sales declines for the manufacturer brands.

Question 13

An analyst at Onyx,a company that makes bakers' racks,has calculated the sales volume at which the company's costs equal revenue.This analyst announced at the company's quarterly sales meeting that 13,000 racks at an average cost of $150 must be sold to retail stores during the next quarter to reach this point.Which important factor has been excluded from his analysis?
A) fixed and variable cost determination
B) break-even analysis
C) market share
D) consumer demand

Accepted Answer

The analyst has only considered the company's costs and revenue without taking into account consumer demand. Consumer demand is a critical factor in determining sales volume, and without considering it, the analysis may not accurately reflect the actual sales volume required to break even.

Question 14

Which of the following BEST describes extranets between suppliers and customers?
A) They cannot be used by a traditional bricks-and-mortar store.
B) They save significant amounts associated with the changing of prices.
C) They cost more than they save.
D) They will someday replace marketing inventory systems.

Accepted Answer

Extranets between suppliers and customers often provide a platform for real-time price and inventory updates, which can significantly reduce costs associated with price changes. However, there is no evidence to suggest that they cannot be used by traditional bricks-and-mortar stores, that they cost more than they save, or that they will replace marketing inventory systems.

Question 15

In the mature and highly competitive furniture industry,you would expect furniture manufacturers to engage in which of the following?
A) prestige pricing
B) a price war
C) geographical pricing
D) price escalation

Accepted Answer

In a mature and highly competitive industry, manufacturers often engage in price wars to attract customers by undercutting competitors' prices, as other differentiation strategies may be less effective or saturated.

Question 16

HeartGood Eggs decided to offer a much larger than customary profit margin to grocery wholesalers and retailers on its new low-cholesterol eggs.This pricing strategy is designed to do all of the following EXCEPT which one?
A) develop wide and convenient distribution
B) encourage trial by consumers if priced low by retailers
C) maximize profit margin for the producer
D) give dealers an incentive to promote the new product

Accepted Answer

The pricing strategy is not designed to maximize profit margin for the producer. Instead, it is designed to encourage adoption of the new product by offering a larger profit margin to retailers and wholesalers, which will help develop wider distribution, encourage consumer trial, and give dealers an incentive to promote the product.

Question 17

Regency Inc.makes disposable cap and gown sets for graduations.Each cap and gown set sells for $15.The average variable cost for manufacturing 10 cap and gown sets is $100.Total fixed costs for the year equal $65,000.What is the break-even point in units?
A) 4,334
B) 1,300
C) 13,000
D) 765

Accepted Answer

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit. Here, the selling price per unit is $15, and the variable cost per unit is $10 (since $100/10 sets = $10 per set). Therefore, the contribution margin per unit is $5. The break-even point is $65,000 / $5 = 13,000 units.

Question 18

According to the text,which of the following statements describes a limitation associated with break-even analysis?
A) It can be expressed only as a break-even point in dollar amounts.
B) It considers only demand.
C) It is sometimes difficult to ascertain whether a cost is fixed or variable.
D) It requires the calculation of marginal revenue.

Accepted Answer

One of the limitations of break-even analysis is that it can be difficult to accurately determine and separate fixed and variable costs. This can lead to inaccurate break-even calculations and decisions. The other statements (A, B, and D) are incorrect as they do not accurately describe limitations of break-even analysis.

Question 19

During the off-season,Parrish Farms,a bed-and-breakfast inn,offers a 25 percent reduction on its weekend rates to entice customers to make last-minute reservations at its website.This is an example of pricing strategy used as which of the following?
A) a direct sales tool
B) a promotion strategy
C) a product strategy
D) an Internet enhancer

Accepted Answer

The pricing strategy in question is a promotion strategy as it is being used to entice customers to make last-minute reservations on the website.

Question 20

What happens when pricing is used as part of a promotion strategy?
A) It must be accompanied by personal selling.
B) It cannot be used as a public relations tool.
C) It can be effectively used in trade promotions.
D) It makes the establishment of a price-to-quality relationship unnecessary.

Accepted Answer

Pricing can be effectively used in trade promotions, such as offering discounts or special deals to retailers or wholesalers. This can encourage them to stock and promote the product, leading to increased sales. Pricing can also be used in other promotion strategies, such as sales promotions or bundle offers to customers. However, pricing should not be the only promotion strategy used, as it may not effectively communicate the value proposition of the product or brand.

Quiz 16: Pricing Concepts

Amanti Lighting sells a lamp kit for making personalized lighting.The company sells each lamp kit for $22.The average variable cost for each lamp kit is $13,and the total annual fixed costs for plant operation is $78,300.What is the break-even point in units?

How do shopbots affect pricing strategies?

What is another name for on-line price comparison engines?

How can manufacturers regain some control over the price their products are sold for at the retail level?

Safeway will place well-known brands on the shelves at high prices while offering its own Safeway brand at lower prices.This practice is an example of which of the following?

When Laser Technology developed and introduced a high-tech crash investigation system to be used by law enforcement officers,the company determined that demand for the product was inelastic,and there was no existing competition.What should be the pricing strategy for the system?

With respect to pricing,what has retailers' presence on the Internet resulted in?

Entertainment Central makes video game consoles,which it sells for $500.It estimates its variable costs to be $200 per console.It figures its fixed costs to be $600,000 per year.How many consoles does it have to sell to break even?

According to the text,which of the following statements about the impact of the Internet on pricing strategy is true?

Many consumers,especially when faced with an uncertain purchase decision,think which of the following?

Which of the following BEST describes selling against the brand?

Which of the following BEST describes extranets between suppliers and customers?

In the mature and highly competitive furniture industry,you would expect furniture manufacturers to engage in which of the following?

HeartGood Eggs decided to offer a much larger than customary profit margin to grocery wholesalers and retailers on its new low-cholesterol eggs.This pricing strategy is designed to do all of the following EXCEPT which one?

Regency Inc.makes disposable cap and gown sets for graduations.Each cap and gown set sells for $15.The average variable cost for manufacturing 10 cap and gown sets is $100.Total fixed costs for the year equal $65,000.What is the break-even point in units?

According to the text,which of the following statements describes a limitation associated with break-even analysis?

During the off-season,Parrish Farms,a bed-and-breakfast inn,offers a 25 percent reduction on its weekend rates to entice customers to make last-minute reservations at its website.This is an example of pricing strategy used as which of the following?

What happens when pricing is used as part of a promotion strategy?