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| 1 | |
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. |
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| 2 | |
A regional manager for a chain of auto parts stores visits one of the stores in the chain. He looks in the store's warehouse and finds about 100 cases of motor oil that have been sitting in the warehouse for over one year. Upon inspection, he finds that in each case, one of the twelve cans of oil has leaked, thus soaking through the box and making the case unfit for sale. The regional manager instructs the store manager to unpack all of the cases, discard the leaking cans, clean up the remaining cans, and to contact the oil company for new boxes. He tells the store manager to repackage the remaining cans in the new boxes and to sell the cases to customers at the retailer's cost with no added markup. He explains to the store manager that moving this inventory will not result in immediate profit, but that it will benefit the store by improving the: |
| | A) | markup. |
| | B) | markup chain. |
| | C) | markup percent. |
| | D) | stockturn rate. |
| | E) | break-even point. |
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| 3 | |
A producer incurred costs of $54,000 for labour and materials and $26,000 for fixed overhead expenses in a year. The firm produced 20,000 units during the year. If the producer desires a profit of $1 per unit in the coming year, what should the producer's selling price be using average-cost pricing? |
| | A) | $3.70. |
| | B) | $2.30. |
| | C) | $5.00. |
| | D) | $6.00. |
| | E) | Cannot be determined from the information provided. |
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| 4 | |
Which of the following is an example of a variable cost for a producer? |
| | A) | Rent. |
| | B) | Managers' salaries. |
| | C) | Insurance. |
| | D) | Property taxes. |
| | E) | Sales commissions. |
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| 5 | |
Average-cost pricing: |
| | A) | may be very profitable if actual sales are higher than expected. |
| | B) | may lose money for the firm is actual sales are less than expected. |
| | C) | does not take demand into account in setting prices. |
| | D) | is simple in theory but often fails in practice. |
| | E) | all of the above. |
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| 6 | |
The main difference between experience curve pricing and average-cost pricing is that: |
| | A) | average variable costs remain constant in experience curve pricing, but not in average-cost pricing. |
| | B) | average-cost pricing is based on actual average costs in the past, while experience curve pricing is based on an estimate of future average costs. |
| | C) | average-cost pricing requires estimating the quantity the firm expects to sell, while experience curve pricing does not. |
| | D) | average-cost pricing takes into account both fixed and variable costs, while experience curve pricing deals only with variable costs. |
| | E) | none of the above. |
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| 7 | |
Phoenix, Co. wanted to achieve a 20 percent return on an investment of $2 million during the coming year. Last year total costs for its product were $200,000, and 40,000 units were sold. The company expects to sell the same number of units in the coming year. Using target return pricing, what price should it charge for its product? |
| | A) | $5. |
| | B) | $10. |
| | C) | $15. |
| | D) | $20. |
| | E) | Cannot be determined from the information provided. |
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| 8 | |
A company has total fixed cost of $120,000. Its variable cost per unit is $2.00 and its price per unit is $3.50. the break-even point in units is: |
| | A) | p. 60,000. |
| | B) | p. 80,000. |
| | C) | p. 34,286. |
| | D) | p. 21,818. |
| | E) | Cannot be determined from the information provided. |
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| 9 | |
A company has total fixed cost of $400,000. Its fixed-cost contribution per unit is $10.00, and its price per unit is $5.00. What is the break-even point in sales dollars? |
| | A) | $200,000. |
| | B) | $2,000,000. |
| | C) | $4,000,000. |
| | D) | $800,000. |
| | E) | Cannot be determined from the information provided. |
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| 10 | |
The main advantage that marginal analysis has over most other popular pricing methods is that it: |
| | A) | considers both fixed and variable costs. |
| | B) | takes into account the break-even point. |
| | C) | allows managers to evaluate pricing alternatives. |
| | D) | takes into account both costs and demand. |
| | E) | incorporates the markup chain. |
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| 11 | |
Consider the following demand schedule for a product:
Quantity Demanded/Sold Price
1 $300
2 $275
3 $250
4 $225
5 $200
As the quantity demanded/sold increases from 3 units to 4 units, what is the marginal revenue? |
| | A) | $25. |
| | B) | $50. |
| | C) | $750. |
| | D) | $900. |
| | E) | $150. |
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| 12 | |
In marginal analysis, the profit maximizing point is the point at which: |
| | A) | marginal revenue is equal to, or slightly higher than, marginal cost. |
| | B) | total revenue and total cost are equal. |
| | C) | the difference between total revenue and total cost is maximized. |
| | D) | marginal profit and total profit are equal. |
| | E) | Both A and C. |
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| 13 | |
An automobile manufacturer charges a higher price for its "hybrid" car that runs on both electricity and gasoline than it charges for a car that runs on only gasoline. The manufacturer contends that the consumer will save money with the hybrid car in the long run because the money saved on gasoline will more than cover the price differential between the hybrid car and a regular car. This manufacturer is using: |
| | A) | price leadership. |
| | B) | value in use pricing. |
| | C) | price lining. |
| | D) | psychological pricing. |
| | E) | reference pricing. |
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| 14 | |
Some consumers maintain a "price-quality association," meaning that if a product has a high price, they assume the product must have high quality. This "price-quality association" is the basis for the use of: |
| | A) | odd-even pricing. |
| | B) | prestige pricing. |
| | C) | leader pricing. |
| | D) | reference pricing. |
| | E) | price lining. |
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| 15 | |
When consumers decide to purchase a music CD from Amazon.com, the company's website often suggests that consumers purchase an additional CD by the same artist for a combined price that is lower than the two CDs would sell for separately. Amazon.com is using: |
| | A) | product-bundle pricing. |
| | B) | complementary product pricing. |
| | C) | full-line pricing. |
| | D) | bid pricing. |
| | E) | demand-backward pricing. |
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| 16 | |
Fly-Right Travel Agency arranges vacation packages to Disney World in Florida. The price includes airfare, a rental car, deluxe accommodations, and tickets to Disney World and other attractions. Fly-Right is using: |
| | A) | product-bundle pricing. |
| | B) | complementary product pricing. |
| | C) | full-line pricing. |
| | D) | bid pricing. |
| | E) | demand-backward pricing. |
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| 17 | |
A paving contractor wants to work on road construction contracts administered and paid for by the state government. The contractor submits a sealed proposal to the state department of transportation for each construction job. The proposal contains a description of how the contractor will fulfil the specifications for the job at a specified price. The contractor is engaging in: |
| | A) | odd-even pricing. |
| | B) | prestige pricing. |
| | C) | leader pricing. |
| | D) | bid pricing. |
| | E) | price lining. |
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