Question 1

What is the number of units that must be sold for the total revenue to equal the total cost called?
A) break-even quantity
B) stabilization quantity
C) intersect quantity
D) equalization quantity

Accepted Answer

The number of units that must be sold for the total revenue to equal the total cost is called the break-even quantity. This is the point where the company is not making a profit or a loss.

Question 2

Which of the following best describes contribution margin?
A) the profit margin on a unit of sale
B) the number of units that must be sold for total revenue to equal total costs
C) the cost of producing or purchasing one unit
D) the sum of fixed and variable costs for a particular quantity of production

Accepted Answer

Contribution margin is the amount of revenue left over after deducting variable costs from sales revenue. In other words, it is the profit margin on a unit of sale.

Question 3

Maya has a small cafe that specializes in gourmet hot dogs. Which of the following would be considered part of her variable costs?
A) hot dog buns
B) insurance
C) utilities
D) salaries

Accepted Answer

Hot dog buns are part of the variable costs because the amount of buns needed will vary based on the number of hot dogs sold. Insurance, utilities, and salaries are fixed costs as they do not vary based on the number of hot dogs sold.

Question 4

You would like to start a food truck that sells gourmet frozen juice pops. If your fixed costs are $500, variable costs are $2.50, and you plan to sell each juice pop for $4, what is your break-even point?
A) 200 juice pops
B) 334 juice pops
C) 125 juice pops
D) 422 juice pops

Accepted Answer

The break-even point formula is:

Break-even point = Fixed costs / (Price - Variable costs)

Substituting the given values, we get:

Break-even point = $500 / ($4 - $2.50) = 334 juice pops

Therefore, option B is the correct answer.

Question 5

Contribution margin is calculated as _______ less _______.
A) sales revenue; variable costs
B) fixed costs; variable costs
C) sales revenue; fixed costs
D) break-even point; variable costs

Accepted Answer

Contribution margin is calculated as sales revenue minus variable costs. This represents the amount of money that is available to cover fixed costs and contribute to profit. Option B is incorrect because fixed costs are not subtracted to calculate contribution margin. Option C is incorrect because fixed costs are not subtracted from sales revenue to calculate contribution margin. Option D is incorrect because the break-even point is not subtracted to calculate contribution margin.

Question 6

ABC Cupcakes is a small bakery specializing in gourmet cupcakes. Which of the following would be categorized as one of its fixed costs?
A) flour
B) cupcake decorations
C) eggs
D) rent

Accepted Answer

Rent is a fixed cost as it remains constant regardless of how many cupcakes are produced. Flour, eggs, and cupcake decorations are variable costs as they vary depending on the amount of cupcakes produced.

Question 7

Janna's Jewels are premium priced because the company wants to project an image of exclusivity, quality, and status. Its advertising states, "Not the least expensive-simply the best." Which pricing objective does the company pursue?
A) increasing market share
B) building loyal user base
C) communicating brand value
D) maintaining status quo

Accepted Answer

The company's pricing objective is to communicate brand value by projecting an image of exclusivity, quality, and status. The advertising explicitly states that they are not the least expensive but "simply the best," indicating that they prioritize quality over affordability.

Question 8

Two competing gas stations in a small town almost always have the same price for gasoline. If one gas station raises or lowers the price of a litre of gas, the other station quickly follows suit. Which pricing objective does this illustrate?
A) increasing market share
B) maintaining status quo
C) communicating brand value
D) building loyal user base

Accepted Answer

This situation illustrates the pricing objective of maintaining status quo, as both gas stations are keeping their prices consistent with each other and not attempting to gain a competitive advantage through pricing.

Question 9

Your company produces digital activity trackers. What is the break-even point if fixed costs are $5000, variable costs are $50, and the activity trackers sell for $120?
A) 100 units
B) 72 units
C) 42 units
D) 127 units

Accepted Answer

Break-even point = Fixed costs / (Price - Variable costs)
= $5000 / ($120 - $50)
= 72 units

Question 10

Apple uses premium pricing for their products and prices are rarely discounted. This suggests that Apple has which of the following pricing objectives?
A) to build a loyal user base
B) to communicate brand value
C) to maintain the status quo
D) to increase market share

Accepted Answer

Apple's use of premium pricing without discounts suggests that their pricing objective is to communicate brand value and maintain a perception of quality and exclusivity.

Question 11

All of the following would be considered fixed costs for a producer EXCEPT which one?
A) raw materials
B) rent
C) insurance
D) property taxes

Accepted Answer

Raw materials are considered variable costs, as they vary based on the level of production. Rent, insurance, and property taxes would all be considered fixed costs, as they do not vary based on the level of production.

Question 12

While watching television, you see an advertisement for a microwave pasta cooker. You're interested but are sure it is going to be too expensive, and you wouldn't pay over $20 for it. To your surprise, the pasta cooker is being offered for the low price of $19.99. This is an example of what type of pricing strategy?
A) product-line pricing
B) new-product pricing
C) psychological pricing
D) promotional pricing

Accepted Answer

This is an example of psychological pricing, as the price of $19.99 is just below the psychological threshold of $20, making it seem like a better deal to consumers.

Question 13

You have been asked to calculate the break-even point for the televisions that your company produces. You know that fixed costs are equal to $6000 and variable costs are $20. The televisions sell for $120. What is the break-even point?
A) 70 units
B) 50 units
C) 40 units
D) 60 units

Accepted Answer

Break-even point = Fixed costs / (Selling price per unit - Variable cost per unit)= 6000 / (120 - 20)= 6000 / 100= 60 units

Question 14

For any product, what is the break-even quantity?
A) the number sold such that variable costs equal revenues
B) the total number produced to equal the total resources available to the producer
C) the number of products needed to be sold for total revenue to equal total costs
D) the dollar volume of total sales

Accepted Answer

The break-even quantity is the number of products needed to be sold for total revenue to equal total costs. It is the point at which the business breaks even and does not make a profit or a loss. This can be calculated by dividing the total fixed costs of production by the contribution margin per unit (which is the selling price per unit minus the variable cost per unit). Therefore, choice C is the correct answer.

Question 15

Hallmark cards develops a new line of cards that have a total cost of $200,000 and a price of $3 each. If 20,000 cards are sold the first month, what is the total revenue?
A) $60,000
B) $400,000
C) $140,000
D) $150,000

Accepted Answer

Total revenue is calculated by multiplying the price of each card by the number of cards sold: $3 * 20,000 = $60,000.

Question 16

Nia buys a hot dog from a food truck for $5. What does this amount represent for the food truck?
A) variable cost
B) fixed cost
C) break-even amount
D) revenue

Accepted Answer

The $5 paid by Nia represents revenue, which is the total amount of money earned by the food truck from selling its products.

Question 17

You are planning a trip to Disney World in Florida and notice that most of the hotels in the area are priced similarly. You know from class that these hotels have which of the following pricing objectives?
A) communicating brand value
B) building a loyal customer base
C) increasing market share
D) maintaining the status quo

Accepted Answer

The answer of You are planning a trip to Disney...

Question 18

When companies offer discounted pricing or special offers on Canada Day and Labour Day, which pricing strategy are they using?
A) promotional pricing
B) psychological pricing
C) product-line pricing
D) reference pricing

Accepted Answer

Promotional pricing is the strategy of offering temporary discounts or special offers to create a sense of urgency and encourage customers to make a purchase. The specific dates of Canada Day and Labour Day make them ideal opportunities for companies to create these promotions and attract customers.

Question 19

Which of the following pricing strategies would be most commonly used for new products?
A) price skimming
B) special event pricing
C) price lining
D) everyday low prices

Accepted Answer

Price skimming is commonly used for new products as it involves setting a high price initially to maximize profits from early adopters before gradually lowering the price to attract more price-sensitive customers. This strategy allows the company to recoup development and launch costs quickly and also creates a perception of high quality and exclusivity for the product.

Question 20

The recession has hit Dillon Products hard, and the company is willing to cut prices on its products in the short term to attract customers-even if it is not making much money on each sale-because it needs revenue to make payroll and pay its bills. Which pricing objective best describes this approach?
A) building loyal user base
B) increasing market share
C) survival
D) maintaining status quo

Accepted Answer

The pricing objective that best describes Dillon Products' approach is survival. The company is willing to cut prices to attract customers in the short term in order to generate enough revenue to pay its bills and make payroll, indicating that their primary goal is to simply stay in business during the recession. Building a loyal user base, increasing market share, and maintaining the status quo are not the primary concerns for the company at this time.

Quiz 14: Managing Distribution and Pricing

What is the number of units that must be sold for the total revenue to equal the total cost called?

Which of the following best describes contribution margin?

Maya has a small cafe that specializes in gourmet hot dogs. Which of the following would be considered part of her variable costs?

You would like to start a food truck that sells gourmet frozen juice pops. If your fixed costs are $500, variable costs are $2.50, and you plan to sell each juice pop for $4, what is your break-even point?

Contribution margin is calculated as _ less _.

ABC Cupcakes is a small bakery specializing in gourmet cupcakes. Which of the following would be categorized as one of its fixed costs?

Janna's Jewels are premium priced because the company wants to project an image of exclusivity, quality, and status. Its advertising states, "Not the least expensive-simply the best." Which pricing objective does the company pursue?

Two competing gas stations in a small town almost always have the same price for gasoline. If one gas station raises or lowers the price of a litre of gas, the other station quickly follows suit. Which pricing objective does this illustrate?

Your company produces digital activity trackers. What is the break-even point if fixed costs are $5000, variable costs are $50, and the activity trackers sell for $120?

Apple uses premium pricing for their products and prices are rarely discounted. This suggests that Apple has which of the following pricing objectives?

All of the following would be considered fixed costs for a producer EXCEPT which one?

You have been asked to calculate the break-even point for the televisions that your company produces. You know that fixed costs are equal to $6000 and variable costs are $20. The televisions sell for $120. What is the break-even point?

For any product, what is the break-even quantity?

Hallmark cards develops a new line of cards that have a total cost of $200,000 and a price of $3 each. If 20,000 cards are sold the first month, what is the total revenue?

Nia buys a hot dog from a food truck for $5. What does this amount represent for the food truck?

You are planning a trip to Disney World in Florida and notice that most of the hotels in the area are priced similarly. You know from class that these hotels have which of the following pricing objectives?

When companies offer discounted pricing or special offers on Canada Day and Labour Day, which pricing strategy are they using?

Which of the following pricing strategies would be most commonly used for new products?