Question 1

The example of "2/10" net 30 is a type of cash discount and means that

Accepted Answer

"2/10" net 30 means that the buyer can deduct 2 percent from the invoice amount if they pay within 10 days, otherwise the full amount is due within 30 days. This is a type of cash discount offered by the seller to encourage prompt payment from the buyer.

Question 2

Florida hotels discount the cost of their hotel rooms during the hot summer months. On the other hand, during the winter months, the price of these rooms increases. This is an example of what type of discounts?

Accepted Answer

The discount offered by Florida hotels is a seasonal discount since it varies depending on the time of year. Trade allowance refers to a discount offered to a reseller, while quantity discounts are based on the amount purchased. Promotional allowances are given to stimulate sales, and functional discounts are based on the function performed by the customer (such as paying cash instead of credit). None of these apply to the situation given in the question.

Question 3

In exchange for the distribution of your products overseas, your firm has accepted to receive a shipment of imported products in trade. This is an example of what type of countertrade?

Accepted Answer

This is an example of a barter, which is a direct exchange of goods and services between two parties without the use of money.

Question 4

If variable costs are $10 per unit, fixed costs are $300 000, and expected unit sales are 50 000 the unit cost is

Accepted Answer

The unit cost is calculated by adding the variable cost per unit to the fixed cost per unit. Fixed cost per unit is $300,000 / 50,000 units = $6. Therefore, the total unit cost is $10 (variable cost) + $6 (fixed cost per unit) = $16.

Question 5

In ________ pricing, the company decides how to price its products to different customers in different locations and countries.

Accepted Answer

Geographical pricing involves setting prices for products or services depending on the location or region where they are sold. This approach takes into account the variations in demand, costs, and competition in different geographical areas.

Question 6

When a firm bases its price largely on competitors' prices, it is using a pricing strategy that is called

Accepted Answer

Going-rate pricing, also known as competitive pricing, is a pricing strategy in which a firm bases its price largely on competitors' prices. This strategy is common in industries where there are many competitors and products are similar. The firm will set its price around the average price of its competitors or slightly below or above it, depending on its objectives.

Question 7

The three major considerations in price setting are: costs set a "floor" to the price; ________; and customers' assessment of unique features establishes the price ceiling.

Accepted Answer

Competitors' prices and the price of substitutes provide an orienting point, meaning that they help to give a general idea of what customers are willing to pay for the product. However, costs set a "floor" to the price because the company needs to cover its expenses and make a profit, and customers' assessment of unique features establishes the price ceiling because they may be willing to pay more for certain unique features or benefits of the product. The other choices are either partially correct or incorrect. For example, while competitors' prices may provide a "target price" goal, this is not the only consideration in price setting. Also, target costing is a cost management technique, not a consideration in price setting.

Question 8

An increasing number of companies now base their price on the customer's ________ of their products.

Accepted Answer

Perceived value refers to how much the customer believes a product is worth based on their own perceptions and expectations. More and more companies are using this approach to pricing, rather than simply setting prices based on production costs or competitor prices. This allows them to charge more for products that are perceived as high-quality or valuable, while potentially offering discounts or promotions for items that are perceived as more basic or affordable.

Question 9

Value pricing is not a matter of simply setting lower prices; it is a matter of reengineering the company's operations to become a low-cost producer without sacrificing quality; and lowering prices significantly to attract a large number of ________ customers.

Accepted Answer

Value pricing is about attracting value-conscious customers who prioritize getting quality products for the lowest price possible. This requires the company to reengineer its operations to become a low-cost producer while maintaining the same level of quality. Therefore, option E, value-conscious customers, is the best choice. Options A, B, C, and D do not accurately describe the type of customers that value pricing is aimed at.

Question 10

The key to perceived-value pricing is to deliver more unique value than your competitors and to ________ this to prospective buyers.

Accepted Answer

Demonstrating the unique value of a product or service to prospective buyers is essential for perceived-value pricing.

Question 11

Caterpillar wants to lower production costs in order to decrease its required break even volume. Which formula should they use for the break-even calculation?

Accepted Answer

In order to lower the required break-even volume, Caterpillar needs to decrease its fixed costs and/or increase the selling price or decrease the variable costs. The formula for break-even calculation is fixed costs divided by the difference between the selling price and variable costs. By using this formula, Caterpillar can determine the selling price or the variable costs needed to reach a desired break-even volume. Using option B will help the company to determine the break-even volume by taking into account the fixed costs and the difference between the selling price and variable costs.

Question 12

Auction-type pricing is becoming very popular today due to the Internet. The three types of auction-types of pricing include sealed-bid auctions, descending bids auctions, and

Accepted Answer

The three types of auction-type pricing include sealed-bid auctions, descending bids auctions, and ascending bids. Therefore, the correct answer would be option D.

Question 13

In recent years, companies have adopted ________ where they try to win loyal customers by charging a fairly low price for a high-quality offering.

Accepted Answer

Value pricing refers to a pricing strategy where companies offer high-quality products at a fair, low price to attract and retain loyal customers. This approach focuses on delivering value to customers rather than trying to charge the highest possible price.

Question 14

The most elementary pricing method is to add a standard ________ to the product's cost.

Accepted Answer

Markup is the most elementary pricing method in which a fixed percentage is added to the product's cost to determine the selling price. This method is easy to calculate and commonly used in retail and wholesale businesses. Target-return pricing involves setting the price based on a desired profit or return on investment, while target margin pricing sets the price based on achieving a certain profit margin percentage. Target price pricing involves setting the price based on what the market is willing to pay, while margin pricing involves setting the price based on the product's production cost and desired profit margin.

Question 15

________ is the result of a concentrated effort by designers, engineers, and purchasing agents to reduce the product's overall costs.

Accepted Answer

Target costing involves a concentrated effort by designers, engineers, and purchasing agents to reduce the product's overall costs. It is a proactive approach to cost management where a desired cost is established early in the design and development process, and then achieved through the use of various cost reduction techniques.

Question 16

Pricing methods narrow the range from which the company selects its final price. In selecting that price, the company must consider additional factors, including the impact of other marketing activities, company pricing policies, gain-and-risk-sharing pricing, and the impact of price on

Accepted Answer

The answer of Pricing methods narrow the range from which...

Question 17

Following the industry average, your firm accepts a 20 percent markup on sales. If the unit cost of your product is $20.00 then the retail price would be

Accepted Answer

A 20 percent markup on sales means the product's price is increased by 20% of the unit cost. The calculation is $20.00 + ($20.00 * 20%) = $20.00 + $4.00 = $24.00. However, the correct retail price is $25.00, which indicates a misunderstanding in the question's phrasing. The correct approach for a 20% markup on sales (retail price) is to ensure the $20.00 cost represents 80% of the final price, making the correct answer $25.00.

Question 18

________ is the direct exchange of goods, with no money and no third party involved.

Accepted Answer

Barter is the direct exchange of goods or services between two parties without involving money or any third party. The parties involved in a barter system negotiate mutually acceptable terms of exchange, including the items to be exchanged and their relative values. This type of economic system was prevalent in ancient times and continues to be used in some parts of the world today.

Question 19

In ________ the retailer charges higher prices on an everyday basis but then runs frequent promotions in which prices are temporarily lowered below the EDLP level.

Accepted Answer

The description given fits the definition of high-low pricing, which involves charging higher prices on an everyday basis but then using frequent promotions to temporarily lower prices below the EDLP level.

Question 20

Your company has invested $1 000 000 in plant and equipment and wants to ensure that it receives a 20 percent ROI on the pricing of its products. This 20 percent translates into $200 000. At a $16.00 cost and a 50 000 expected sales volume, what price must your product "go out the door" at to satisfy this ROI return?

Accepted Answer

The answer of Your company has invested $1 000 000...

Quiz 14: Developing Pricing Strategies and Programs