Question 1

When a small business owner doesn't want to make a pricing decision,he/she can use a(n)________ pricing strategy.

Accepted Answer

A suggested retail pricing strategy allows a small business owner to use the price recommended by the manufacturer or supplier, thus avoiding the need to make a pricing decision themselves. This strategy can simplify the pricing process for the business owner.

Question 2

________ is a pricing strategy under which local customers "subsidize" the shipping charges the firm incurs when transporting merchandise to distant customers.

Accepted Answer

Uniform delivered pricing is a pricing strategy in which the company charges the same price for its products to all customers regardless of their location, but includes the shipping costs in the price. This means that local customers end up subsidizing the shipping costs for distant customers.

Question 3

Absorption costing:

Accepted Answer

Absorption costing can cloud the true relationship between price, volume, and costs by including fixed manufacturing and overhead costs in the cost of production. This can make it difficult for managers to assess the true cost of producing individual units and may lead to inefficient operations.

Question 4

Probably the most important consideration a manufacturer has when setting the final price of its new exclusive perfume is:

Accepted Answer

The image the company wants to create for the scent in the customer's mind is the most important consideration for setting the final price of a new exclusive perfume. The price of the perfume should reflect its perceived value in the minds of the customers, which is influenced by the brand image, packaging, advertising, and other factors that create a sense of luxury and exclusivity. The production cost and competitor's prices may be relevant factors, but they are secondary to the customer's perception of value. Odd pricing and price lining may be pricing strategies that could be used to reinforce the desired image, but they are not the primary consideration.

Question 5

________ include(s)the unit cost of a manufacturer's product under an absorption costing system.

Accepted Answer

Variable costs are considered in the unit cost calculation under an absorption costing system. Opportunity costs, depreciation, and insurance may affect the overall cost structure of the manufacturer, but they are not directly included in the unit cost calculation.

Question 6

Baseball cards usually sell for 10 cents each.The Card Shop advertises them at "12 for $1.00." This is:

Accepted Answer

The Card Shop's pricing strategy is an example of multiple unit pricing, where customers are more likely to buy in larger quantities at a lower price per unit. The 12 for $1.00 offer means each card is about 8.3 cents, which is less than the usual price of 10 cents.

Question 7

Which of the following factors is vital to determining the effects of competition on the small firm's pricing policies?

Accepted Answer

The competitor's location is crucial in determining the effects of competition on a small firm's pricing policies because it directly influences the level of competition a business faces. If competitors are located nearby, the firm may need to adjust its pricing strategies to remain competitive.

Question 8

When considering the competition in price setting,the small business owner should:

Accepted Answer

To effectively compete in price setting, the small business owner should consider all of the above factors: the competitors' location, motives for their prices, and the nature of the goods being sold. Factors such as proximity to customers and distribution channels, as well as the perceived value and quality of the goods, can also impact the pricing strategy. Understanding these variables can help the small business owner set competitive prices that are appealing to customers but also ensure a profitable margin.

Question 9

A common "me-too" pricing policy by which the small business owner establishes his/her prices by monitoring competitor's prices and then matching them is called:

Accepted Answer

Follow-the-leader pricing is when a small business owner sets their prices based on their competitor's prices, therefore matching them. This pricing policy is often used by small businesses that lack the resources to conduct extensive market research or create unique value propositions.

Question 10

When a computer manufacturer offers its computer with software pre-installed,a printer,and Internet service,as all part of one price,the manufacturer is using a:

Accepted Answer

A bundling strategy is a pricing strategy where a company offers several products or services as a package deal for one price. In the given scenario, the computer manufacturer is offering a computer with pre-installed software, a printer, and internet service as a package for one price. This is an example of a bundling strategy.

Question 11

________ is the average markup required on all merchandise to cover the cost of items,incidental expenses,and a profit.

Accepted Answer

Initial markup is the average markup added to the cost of goods to cover expenses and profit, different from direct or specific item markups.

Question 12

The Pastry Shop normally sells cheese Danishes for 60 cents each.On Mondays and Tuesdays,its slowest days,The Pastry Shop offers cheese Danishes at "4 for $2.00." This is:

Accepted Answer

Multiple unit pricing involves offering a discount for purchasing multiple units of a product, as seen in the "4 for $2.00" deal for cheese Danishes.

Question 13

The most commonly used pricing technique for manufacturers is:

Accepted Answer

Cost-plus pricing is the most commonly used pricing technique for manufacturers, where the selling price is calculated by adding a markup percentage to the total cost of producing the product. This approach ensures that the company covers all costs and makes a profit, making it a popular choice among manufacturers.

Question 14

Dotty has her competitors' price information.Her most effective use of that information would be to:

Accepted Answer

Using competitor price information as one variable in pricing mix allows Dotty to consider other factors such as the cost of production, target market, and perceived value of the product before making a pricing decision. It also enables her to create a pricing strategy that is sustainable and competitive in the long term rather than just reacting to the prices of competitors.

Question 15

If an item costs a small business owner $15,and the desired markup on it is 60%,its retail price would be:

Accepted Answer

The answer of If an item costs a small business...

Question 16

A reliable cost accounting system is necessary for accurate pricing.The traditional method of product costing,where the costs of direct materials,direct labor,and factory overhead are included,is called ________ costing.

Accepted Answer

Direct costing only includes direct materials and direct labor in product costing, while variable costing includes direct materials, direct labor, and variable overhead in product costing. Break-even analysis is a tool used to determine the point at which total revenue equals total cost, while absorption costing includes direct materials, direct labor, and both fixed and variable overhead in product costing. Therefore, absorption costing is the traditional method of product costing that includes all three cost components.

Question 17

Many small business owners use a ________ strategy to move stale,damaged,or slow moving goods or to encourage shoppers to purchase merchandise before an upcoming season.

Accepted Answer

Discount pricing is the strategy used to move stale, damaged, or slow-moving goods by offering them at lower prices than their original prices. The purpose of this strategy is to encourage shoppers to make purchases before an upcoming season, and to clear out inventory quickly. This strategy helps small business owners to generate revenue and create more space for new products. Multiple pricing involves offering products in different sizes, quantities or product packages with different prices. Opportunistic pricing involves price fluctuations based on external factors like supply and demand. Price lining involves offering products in a range of prices to meet the varying purchasing power of consumers. However, none of these strategies are specifically targeted at moving stale, damaged or slow-moving goods.

Question 18

If a haberdasher purchases a tie for $12 and plans to sell it for $18,the percentage of retail price markup would be:

Accepted Answer

The percentage of retail price markup is calculated by dividing the markup amount by the retail price and multiplying by 100. In this case, the markup amount is $18 - $12 = $6, and the retail price is $18. Therefore, the percentage of retail price markup is $6 / $18 * 100 = 33.33%, which is closest to 33%.

Question 19

Cost-plus pricing has several disadvantages,including:

Accepted Answer

The answer of Cost-plus pricing has several disadvantages,including:
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Question 20

When a small business is faced with price competition from a much larger competitor,it should consider:

Accepted Answer

Going head-to-head on prices with a larger competitor can be a risky move for a small business, as it may not have the same resources to sustain a price war. Instead, a better option is to focus on non-price competition by offering value-added services, such as personalized customer service, faster delivery times, or more flexible payment options. By differentiating themselves in this way, small businesses can attract customers based on factors other than just price, and build a loyal customer base that is less likely to switch to a larger competitor offering cheaper prices.

Quiz 11: Pricing and Credit Strategies

When a small business owner doesn't want to make a pricing decision,he/she can use a(n) ________ pricing strategy.