Question 1

A promotional allowance refers to

Accepted Answer

A promotional allowance is a cash payment or an extra amount of "free goods" awarded to sellers in the marketing channel for undertaking certain advertising or selling activities to promote the product.

Question 2

Which of the following statements regarding a trade-in allowance is most accurate?

Accepted Answer

A trade-in allowance is a discount offered by a seller to a buyer who also trades in a used item to be sold by the seller. This allows the seller to resell the used item and the buyer to receive a lower price on the new item without lowering the list price. Therefore, option B is the most accurate statement regarding a trade-in allowance.

Question 3

If the cash discount terms for a $500 purchase are 4/10 net 30,the number 4 refers to

Accepted Answer

The number 4 refers to the percentage discount that is offered if the bill is paid within 10 days. This is because the cash discount terms 4/10 refer to a 4% discount if the bill is paid within 10 days, otherwise, the entire amount is due within 30 days.

Question 4

Allowances,like discounts,refer to

Accepted Answer

Allowances refer to reductions from list or quoted prices to buyers for performing some activity, such as providing advertising or display space, or agreeing to purchase in large quantities. Therefore, option E is the best choice. The other options do not accurately describe what allowances are.

Question 5

Everyday low pricing refers to

Accepted Answer

The answer of Everyday low pricing refers to
...

Question 6

The acronym "EDLP" stands for __________.

Accepted Answer

EDLP stands for "everyday low pricing." This refers to a pricing strategy where retailers offer consistently low prices on their products, rather than relying on sales and promotions to attract customers.

Question 7

After offering a promotional allowance,the price of a product returns to its regular price level.When this happens,the retail store's gross margin on that product __________ on those items that were bought with the allowance but not sold during the price special promotion.

Accepted Answer

After offering a promotional allowance,the price of a product returns to its regular price level.When this happens,the retail store's gross margin on that product increases substantially on those items that were bought with the allowance but not sold during the price special promotion.See Marketing Matters.

Question 8

Larry's Lawn Care allows customers to use a credit card for purchases.Larry pays 4 percent of the sale to the credit card company.To promote more business,Larry decides to offer a lower price to customers paying cash-that price being 3 percent less than the standard list price.Larry is giving his customers a(n)

Accepted Answer

Larry is offering a lower price to customers paying cash, which is known as a cash discount.

Question 9

When Sherman bought gas,he noticed the convenience store offered him a 2 percent reduction in price if he paid cash rather than if he used his credit card to pay for his purchase.The convenience store was offering him a

Accepted Answer

A cash discount is a reduction in price offered to customers who pay with cash rather than using credit. In this scenario, Sherman was offered a 2 percent reduction in price if he paid with cash.

Question 10

The practice of replacing promotional allowances with lower manufacturer list prices is referred to as

Accepted Answer

The practice of replacing promotional allowances with lower manufacturer list prices is known as everyday low pricing (EDLP). This approach involves offering consistent, low prices to consumers without the need for frequent promotions or discounts. It is widely used by retailers such as Walmart and is believed to build customer loyalty and reduce price sensitivity.

Question 11

A new car dealer can reduce the list price of a new Ford F-150 pickup truck by offering you a __________ of $1,000 for your 1998 Nissan Altima.

Accepted Answer

This scenario describes a trade-in allowance, which is essentially a credit given by the dealer towards the purchase of a new vehicle in exchange for the customer's trade-in vehicle.

Question 12

Instead of everyday low prices (EDLP),supermarkets prefer a __________ approach,which is based on frequent specials where prices are temporarily lowered for a brief period of time and then raised again.

Accepted Answer

The description in the question matches the hi-lo pricing strategy, where supermarkets offer frequent promotions and discounts to attract customers, followed by brief periods of higher prices. This approach creates a sense of urgency and encourages customers to buy while the prices are low.

Question 13

A price reduction given when a used product is part of the payment on a new product is referred to as a __________.

Accepted Answer

A trade-in allowance is a price reduction given when a customer trades in a used product as part of the payment for a new product. Cash discount is a reduction in price offered to customers who pay their bills within a specified period of time. Seasonal discount is a price reduction given to customers for purchasing during a specified time period. Promotional allowance is a price reduction given to customers for participating in sales promotion activities. A subsidy discount is a reduction in price offered by the government to encourage the purchase of certain goods or services.

Question 14

Which of the following statements about everyday low pricing (EDLP)is most accurate?

Accepted Answer

Some argue that EDLP without price specials is boring for many grocery shoppers. While EDLP is seen as a popular pricing strategy among supermarkets, there is debate about whether it is effective in attracting customers without the added incentive of price specials or promotions. Some customers may find EDLP pricing to be unexciting and prefer the excitement of deals and discounts.

Question 15

If the cash discount terms for a $500 purchase are 4/10 net 30,the number 10 refers to

Accepted Answer

The answer of If the cash discount terms for a...

Question 16

If the cash discount terms for a $500 purchase are 4/10 net 30,the number $500 refers to

Accepted Answer

The number $500 refers to the original price owed on the merchandise. The cash discount terms of 4/10 net 30 mean that the buyer can receive a 4% discount if they pay within 10 days, but they must still pay the full $500 if they wait until 30 days.

Question 17

A construction company was offered a 3 percent reduction in price off all invoices from a lumber yard for paying them within 10 days of issue.The lumber yard was offering a

Accepted Answer

The company was offered a discount for paying within a specific time frame, which is known as a cash discount. Therefore, the best choice is B. The other options do not fit the specific terms of the discount offered by the lumber yard.

Question 18

Cash payments or an extra amount of "free goods" awarded sellers in the channel for undertaking certain advertising or selling activities to promote the product is referred to as a

Accepted Answer

This is because promotional allowance refers to the cash payments or free goods awarded to sellers for promotional activities. Quantity discounts refer to discounts provided when a certain quantity is purchased, seasonal discounts refer to discounts provided during specific seasons, purchase inducement refers to incentives provided to encourage customers to buy, and dynamic pricing policy refers to pricing that changes depending on market conditions.

Question 19

Reductions from list or quoted prices to buyers for performing some activity are referred to as

Accepted Answer

Allowances are reductions from list or quoted prices to buyers for performing some activity. Subsidies are financial assistance given by a government to a person or group in support of an enterprise, while remittances are transfers of money by foreign workers to their home countries. Noncumulative deductions and list price deductions are not specific terms related to discounts given for buyer activities.

Question 20

A trade-in allowance refers to

Accepted Answer

A trade-in allowance refers to a price reduction given when a used product is part of the payment on a new product. Option E is the only choice that matches this definition.

Quiz 14: Arriving at the Final Price