Question 1

The federal government often uses ____ pricing when it grants defense contracts.
A)markup
B)differential
C)breakeven
D)cost-plus
E)competition-based

Accepted Answer

Cost-plus pricing is commonly used by the federal government when granting defense contracts. This pricing strategy involves reimbursing the contractor for their costs incurred during the project plus a guaranteed profit margin. This ensures that the contractor is fairly compensated while also incentivizing them to keep costs reasonable.

Question 2

When determining markup as a percentage of cost, divide the markup amount by
A)price.
B)cost.
C)quantity.
D)revenue.
E)100.

Accepted Answer

When determining markup as a percentage of cost, the markup amount is divided by the cost. This gives the ratio of how much the price has been increased in relation to the original cost.

Question 3

Markup is measured either as a percentage of ____ or a percentage of ____.
A)selling price; cost
B)cost; profit
C)revenue; contribution margin
D)resources used; cost
E)demand; competition

Accepted Answer

Markup is typically measured as a percentage of the cost (to determine how much to charge above the cost) or as a percentage of the selling price (to understand the profit margin on the sale).

Question 4

Kohl's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____ % for this product.
A)64
B)36
C)18
D)57
E)45

Accepted Answer

To find the markup as a percentage of cost, we need to use the formula:

Markup % = (Selling price - Cost price) / Cost price * 100

In this case, the cost price of the cologne is $16.50 and the selling price is $25.95, so we have:

Markup % = (25.95 - 16.50) / 16.50 * 100
Markup % = 9.45 / 16.50 * 100
Markup % = 0.5727 * 100
Markup % = 57.27%

Therefore, the answer is D (57%).

Question 5

What assumption does breakeven analysis make that limits its overall usefulness?
A)It focuses on how to achieve a price objective.
B)It assumes a company wants to gain a certain market share.
C)It relies on demand for a product being inelastic.
D)It focuses only on competitive factors and not costs.
E)It assumes demand is elastic for the product.

Accepted Answer

Breakeven analysis assumes that demand for a product is inelastic, meaning that changes in price do not significantly affect the quantity demanded. However, in reality, demand for a product may be elastic, where a slight change in price can lead to a significant change in the quantity demanded. Therefore, the assumption of inelastic demand limits the overall usefulness of breakeven analysis in some situations.

Question 6

The three primary bases for developing prices are
A)profit, demand, and competition.
B)supply, demand, and marketing objectives.
C)demand, competition, and cost.
D)markup, cost, and cost-plus.
E)negotiation, periodicity, and randomness.

Accepted Answer

The three primary bases for developing prices are demand, competition, and cost. Profit is a goal, not a base for developing prices. Supply is related to cost and is not a primary base for developing prices. Marketing objectives may influence pricing decisions, but they are not a primary base for developing prices. Markup and cost-plus are methods of pricing, not bases for developing prices. Negotiation, periodicity, and randomness are not bases for developing prices.

Question 7

Some grocery stores collect data on competitive prices
A)by calling their competitors.
B)on a quarterly basis.
C)through stores' purchase data.
D)from their resellers.
E)by using comparison shoppers.

Accepted Answer

Using comparison shoppers is the best way for grocery stores to collect data on competitive prices as it involves physically visiting the competitors' stores and recording the prices. This method provides the most accurate and up-to-date information compared to other options such as relying on third-party data, which could be outdated or incomplete.

Question 8

A retailer of Dry Day deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?
A)3%
B)14.3%
C)30%
D)70%
E)12%

Accepted Answer

The markup is $0.60 ($2.00 - $1.40). The markup percentage based on the selling price is ($0.60 / $2.00) * 100% = 30%.

Question 9

Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel, which illustrates ____ pricing. The second is to price its train tickets so that the further away the travel date, the greater the discount, which is best described as ___.
A)demand-based; secondary market pricing
B)demand-based; differential pricing
C)demand-based; periodic discounting
D)cost-plus; secondary markup
E)cost-plus; periodic discounting

Accepted Answer

The first pricing strategy, where Amtrak prices its tickets differently based on the demand for weekday versus weekend travel is an example of demand-based pricing. The second pricing strategy where Amtrak offers a discount based on how far in advance the travel date is, is an example of differential or dynamic pricing, where the price varies based on different variables such as demand, time of day, or season. Therefore, the best answer is B - demand-based differential pricing.

Question 10

When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using ____ pricing.
A)markup
B)demand-based
C)differential
D)cost-plus
E)expensed-based

Accepted Answer

Cost-plus pricing involves determining the cost of making a product and then adding a specified percentage or dollar amount to cover overhead and profit. This method is commonly used in manufacturing industries where costs can be accurately calculated.

Question 11

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using ________
A)price fixing, which considers competition to be less important than costs.
B)price fixing, which considers costs to be less important than competitor's prices.
C)market share pricing, which considers competition to be the ultimate pricing goal.
D)competition-based pricing, which considers profit to be the ultimate pricing goal.
E)competition-based pricing, which considers costs to be less important than competitor's prices.

Accepted Answer

Competition-based pricing involves setting prices based on competitors' strategies, prices, costs, and market offerings. In this scenario, Shell is using competition-based pricing by focusing on BP's prices rather than its own costs, indicating that competitor prices are a more significant factor in their pricing strategy.

Question 12

Saffie is a marketing consultant who specializes in small businesses. Her current client is very interested in estimating the costs for the coming year in order to find the breakeven point. Saffie knows this is an important financial statistic because below the breakeven point, the firm is operating
A)with fixed costs only.
B)with minimal variable costs.
C)with no revenue.
D)with minimal profit.
E)at a loss.

Accepted Answer

The breakeven point is the level of sales at which revenue equals total costs, including both fixed and variable costs. Below the breakeven point, the firm is operating at a loss because costs exceed revenue. Therefore, the correct answer is E, at a loss.

Question 13

If Coca-Cola sets its twelve-pack price to match the price charged by PepsiCo, Coca-Cola is using which of the following pricing methods?
A)Demand-based
B)Cost-based
C)Reference pricing
D)Competition-based
E)Price leader

Accepted Answer

Coca-Cola is using competition-based pricing method by setting its price to match the price charged by PepsiCo. This method involves setting prices based on competitors' pricing strategies to remain competitive in the market.

Question 14

Marketers at organizations engaged in nonprice competition
A)are more concerned about knowing competitors' prices than are marketers in organizations that are engaged in price competition.
B)are not concerned about the prices of competing brands.
C)need competitive price information to make sure that their products are priced at approximately the same level as the prices of competing brands.
D)rely on customers to help them gather information regarding the prices of competing brands.
E)experience high levels of price instability.

Accepted Answer

Marketers at organizations engaged in nonprice competition still need to have an understanding of the prices of competing brands to ensure that their products are priced at a similar level. However, they are not as concerned with constantly monitoring competitors' prices as those engaged in price competition because their focus is on differentiating their products based on factors other than price.

Question 15

During July and August, Crystal Cove Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of
A)differential pricing.
B)incentives.
C)competition-based pricing.
D)demand-based pricing.
E)random discounting.

Accepted Answer

The answer of During July and August, Crystal Cove Golf...

Question 16

For custom-made equipment or commercial construction projects, which pricing method is most likely used?
A)Reference
B)Premium
C)Differential
D)Return on investment
E)Cost-plus

Accepted Answer

For custom-made equipment or commercial construction projects, the cost-plus pricing method is most likely used. This method involves taking the actual cost of producing the product or completing the project and adding a markup to determine the final selling price. This approach is often used in situations where the costs of production or construction are uncertain, as it ensures that the company can earn a profit while also covering its expenses. It is also commonly used for government contracts and other projects where the cost of materials and labor must be closely monitored.

Question 17

Competition-based pricing is
A)used when costs and revenues are secondary to competitors' prices.
B)not useful as a method of increasing market share.
C)not useful if the competing products are homogeneous.
D)not able to increase sales.
E)used when competing products are heterogeneous.

Accepted Answer

Competition-based pricing is a strategy where businesses set their prices based on those of their competitors. This strategy is used when the cost and revenue are secondary to competitors' prices. The goal of this pricing strategy is to remain competitive and maintain or gain market share. Therefore, option A is the correct choice.

Question 18

Everything But Water, a retailer of swimwear, employs a commonly used cost-based pricing method called
A)value pricing.
B)cost-plus pricing.
C)cost discounting.
D)differential pricing.
E)markup pricing.

Accepted Answer

The answer of Everything But Water, a retailer of swimwear,...

Question 19

When products in an industry are relatively homogeneous and price is a key purchase consideration,
A)competition-based pricing becomes more important.
B)demand-based pricing dominates pricing decisions.
C)firms tend to use secondary-market pricing.
D)cost-based methods like markup pricing are dominant.
E)customary pricing is often used.

Accepted Answer

When products in an industry are relatively homogeneous and price is a key purchase consideration, competition-based pricing becomes more important. This is because customers are likely to compare prices of similar products and choose the one that offers the most value for money. Therefore, firms need to set prices that are competitive with those of their rivals to attract customers.

Question 20

If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.
A)markup
B)demand-based
C)competitive
D)peak
E)differential

Accepted Answer

Demand-based pricing is when the price of a product is based on the level of demand for it at a certain time and place. The higher the demand, the higher the price. This type of pricing strategy is commonly used in the travel and hospitality industries, such as for airline tickets and hotel rooms.

Quiz 12: Pricing Concepts and Management

The federal government often uses ____ pricing when it grants defense contracts.

When determining markup as a percentage of cost, divide the markup amount by

Markup is measured either as a percentage of or a percentage of .

Kohl's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____ % for this product.

What assumption does breakeven analysis make that limits its overall usefulness?

The three primary bases for developing prices are

Some grocery stores collect data on competitive prices

A retailer of Dry Day deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?

When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using ____ pricing.

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using ________

Saffie is a marketing consultant who specializes in small businesses. Her current client is very interested in estimating the costs for the coming year in order to find the breakeven point. Saffie knows this is an important financial statistic because below the breakeven point, the firm is operating

If Coca-Cola sets its twelve-pack price to match the price charged by PepsiCo, Coca-Cola is using which of the following pricing methods?

Marketers at organizations engaged in nonprice competition

During July and August, Crystal Cove Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of

For custom-made equipment or commercial construction projects, which pricing method is most likely used?

Competition-based pricing is

Everything But Water, a retailer of swimwear, employs a commonly used cost-based pricing method called

When products in an industry are relatively homogeneous and price is a key purchase consideration,

If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.