Question 1

Raw materials are an example of a firm's ____ costs.
A) selling
B) operating
C) fixed
D) overhead
E) variable

Accepted Answer

Raw materials are usually considered variable costs because they vary with changes in the level of production.

Question 2

If John purchases a tie from JCPenney for $30, the $30 represents JCPenney's ____ from the sale.
A) income
B) cost
C) proceeds
D) breakeven amount
E) revenue

Accepted Answer

Revenue represents the total amount of money earned from a sale or series of sales, so the $30 John paid for the tie is JCPenney's revenue from the sale. Income and proceeds are synonymous with revenue in this context. Cost represents the amount JCPenney paid to acquire or produce the tie, while the breakeven amount refers to the level of sales needed to cover all costs and earn zero profit.

Question 3

If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on _____.
A) cash flow
B) market share
C) survival
D) return on investment
E) dollar sales volume

Accepted Answer

Market share is the percentage of total market sales that a firm enjoys. If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on achieving a particular market share.

Question 4

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

Accepted Answer

The answer of Competition-based pricing is
A) used when costs and...

Question 5

The total amount received from the sales of a product is referred to as _____.
A) total revenue
B) the breakeven quantity
C) variable sales
D) market revenue
E) marginal revenue

Accepted Answer

Total revenue is the amount of money received from selling a product or service. It is calculated by multiplying the unit price by the quantity sold.

Question 6

At a busy intersection in Atlanta, there are four competing gas stations.Each of the stations charges about the same for each gallon of gasoline.The pricing objectives of these firms is _____.
A) survival
B) market share goals
C) status-quo pricing
D) profit maximization
E) competitive

Accepted Answer

The pricing strategy described, where all gas stations charge about the same amount for gasoline, is known as status-quo pricing. This approach aims to maintain existing prices and avoid price wars among competitors, focusing on stabilizing market share rather than aggressively competing on price.

Question 7

In cost-based pricing, a producer adds an amount to the total production cost to provide a profit.The amount added to the production cost is called a _____.
A) discount
B) markup
C) variable cost
D) differentiation
E) price line

Accepted Answer

The amount added to the production cost to provide a profit is called a markup.

Question 8

AT&T charges different rates for long-distance service depending on time of day and distance of the call.This pricing method is called ____ pricing.
A) geographic
B) odd
C) discriminatory
D) demand-based
E) segmented

Accepted Answer

The given pricing method is based on demand as it charges different rates depending on the time of day and distance, suggesting that there is a variation in demand for long-distance service during different times of the day and distances.

Question 9

If Macy's department store managers looked at Dillard's department store prices for identical national brands and, based on that information, decided to advertise a sale on those products, they would be exercising which pricing method?
A) competition-based
B) demand-based
C) cost-based
D) premium
E) penetration

Accepted Answer

Macy's department store managers are using competition-based pricing by using Dillard's prices as a benchmark for their own pricing strategy.

Question 10

A hotel room in New Orleans during Mardi Gras costs considerably more than it would during the following week.This is an example of _____.
A) status-quo pricing
B) cost-based pricing
C) price differentiation
D) variable pricing
E) price adjustment

Accepted Answer

Price differentiation is the practice of charging different prices to different customers for the same product or service. In this case, the hotel is charging a higher price during a peak season (Mardi Gras) compared to a non-peak season. This is a common practice in the hospitality industry as it allows businesses to maximize their profits by charging customers based on their willingness to pay.

Question 11

Costs that depend on the number of units produced are called _____.
A) markup
B) operational expenses
C) fixed costs
D) variable costs
E) overhead

Accepted Answer

Variable costs are costs that vary depending on the number of units produced. The more units produced, the higher the variable costs will be. Examples of variable costs include the cost of direct materials, direct labor, and sales commissions.

Question 12

Price differentiation attempts to sell
A) different products with different features at the same price.
B) identical products at different times at different prices.
C) products at lower prices, due to economies of scale, unintentionally resulting in lower net income for the company.
D) products to customers based on their ability to pay.
E) all products at different prices.

Accepted Answer

Price differentiation refers to the practice of selling identical products at different times or different locations to different customers at different prices to maximize revenue. This practice is commonly seen in industries like airline, hotel, and entertainment where prices for the same product vary based on the timing of the purchase and supply-demand conditions. The other options are incorrect as they either do not involve selling identical products, intentional lowering of prices, or pricing based on ability to pay, which is known as price discrimination.

Question 13

William Clark wants to know his breakeven point.His selling price is $20 per unit, his fixed costs are $6,000, and the variable costs per unit are $6.What is his breakeven quantity?
A) 430 units
B) 428.6 units
C) 300 units
D) 425.6 units
E) 50 units

Accepted Answer

Breakeven Point = Fixed Costs / (Selling Price per unit - Variable Costs per unit)
Breakeven Point = $6,000 / ($20 - $6)
Breakeven Point = $6,000 / $14
Breakeven Point = 428.6 units (rounded up to the nearest whole number)
Therefore, the breakeven quantity is 428.6 units, which is best represented by choice B.

Question 14

Price differentiation is
A) a form of competition-based pricing.
B) a form of cost-based pricing.
C) a form of demand-based pricing.
D) focused on achieving fewer sales but at higher prices.
E) focused on selling different goods for different prices.

Accepted Answer

Price differentiation is a form of demand-based pricing, where prices are set according to the customer's willingness to pay or based on market conditions. This allows businesses to maximize their profits by charging different prices to different segments of customers. It can also be called price discrimination.

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 it sells 20,000 cards the first month, what is its total revenue?
A) $60,000
B) $600,000
C) $400,000
D) $140,000
E) -$140,000

Accepted Answer

Total revenue is calculated by multiplying the number of units sold by the price per unit. Therefore, 20,000 cards sold at $3 each results in a total revenue of $60,000.

Question 16

Demand-based pricing, unlike cost-based pricing, places firms in a better position to
A) attain higher profit levels.
B) estimate demand easily and accurately.
C) perform breakeven analysis.
D) calculate price based on intangible benefits.
E) penetrate the market quickly.

Accepted Answer

Demand-based pricing takes into account the willingness of consumers to pay for a product or service, which can result in higher profit margins for the firm. Cost-based pricing, on the other hand, may result in pricing that is too high or too low, leading to lost sales or lower profits. Therefore, demand-based pricing puts firms in a better position to attain higher profit levels.

Question 17

The sum of the fixed costs and the variable costs of producing a certain number of units is called the _____.
A) cost of goods sold
B) equilibrium cost
C) total cost
D) breakeven cost
E) total operating expense

Accepted Answer

The total cost includes both fixed and variable costs and gives a complete picture of the cost of producing a certain number of units. Option A is not correct as it only includes variable costs related to the actual production of goods sold. Option B is not correct as equilibrium cost refers to the price at which demand and supply are equal. Option D is not correct as breakeven cost only includes the minimum amount of revenue needed to cover the total costs. Option E is not correct as total operating expense includes all costs related to running a business, not just those related to production.

Question 18

Philip James asks you to calculate the breakeven point for him.You need which information from him to do so?
A) dollar values for all assets and owners' equity
B) fixed costs, operating expenses, and net income
C) dollar values for all assets and all liabilities
D) unit costs and fixed costs
E) variable costs per unit, fixed costs, and unit selling price

Accepted Answer

To calculate the breakeven point, we need to know the variable costs per unit, fixed costs, and unit selling price. This information allows us to determine the number of units that need to be sold to cover all costs and break even.

Question 19

For any product, the breakeven quantity is the
A) number sold over fifty units.
B) number of units sold in order for the total revenue to equal the total cost.
C) total number produced to equal the total resources available to the producer.
D) number of products needed to be sold in order to make a reasonable profit.
E) dollar volume of total sales.

Accepted Answer

The breakeven quantity is the number of units sold in order for the total revenue to equal the total cost. This is the point where a company is not making a profit, but is also not losing money.

Question 20

Costs that are incurred no matter how many units of a product are produced or sold are called _____.
A) operating expenses
B) overhead
C) variable costs
D) fixed costs
E) inflexible costs

Accepted Answer

Fixed costs are expenses that do not vary with the level of production or sales. These costs are incurred regardless of how many units of a product are produced or sold. Examples include rent, salaries of administrative staff, and insurance payments.

Quiz 12: Creating and Pricing Products That Satisfy Customers

Raw materials are an example of a firm's ____ costs.

If John purchases a tie from JCPenney for $30, the $30 represents JCPenney's ____ from the sale.

If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on _____.

Competition-based pricing is

The total amount received from the sales of a product is referred to as _____.

At a busy intersection in Atlanta, there are four competing gas stations.Each of the stations charges about the same for each gallon of gasoline.The pricing objectives of these firms is _____.

In cost-based pricing, a producer adds an amount to the total production cost to provide a profit.The amount added to the production cost is called a _____.

AT&T charges different rates for long-distance service depending on time of day and distance of the call.This pricing method is called ____ pricing.

If Macy's department store managers looked at Dillard's department store prices for identical national brands and, based on that information, decided to advertise a sale on those products, they would be exercising which pricing method?

A hotel room in New Orleans during Mardi Gras costs considerably more than it would during the following week.This is an example of _____.

Costs that depend on the number of units produced are called _____.

Price differentiation attempts to sell

William Clark wants to know his breakeven point.His selling price is $20 per unit, his fixed costs are $6,000, and the variable costs per unit are $6.What is his breakeven quantity?

Price differentiation is

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

Demand-based pricing, unlike cost-based pricing, places firms in a better position to

The sum of the fixed costs and the variable costs of producing a certain number of units is called the _____.

Philip James asks you to calculate the breakeven point for him.You need which information from him to do so?

For any product, the breakeven quantity is the

Costs that are incurred no matter how many units of a product are produced or sold are called _____.