Question 1

Bill Needles makes and sells customized silver belt buckles for $225 each.He has determined that his fixed costs are $8,000,and his average variable costs per buckle are $145.
-Refer to Bill Needles.What is his fixed cost contribution per buckle?

Accepted Answer

$225 - $145 = $80

Question 2

In the mature and highly competitive furniture industry,what would you expect furniture manufacturers to engage in?

Accepted Answer

In the maturity stage,with heavy competition,below-market pricing leads to price wars.

Question 3

Richelieu Foods,Inc.decided to offer a much larger than customary profit margin to grocery wholesalers and retailers on its new line of organic pizzas.This pricing strategy is designed to do which of the following?

Accepted Answer

The pizza manufacturer is passing a large portion of the profit margin on to the wholesalers and retailers,not maximizing profit margin for itself.

Question 4

According to your textbook,which of the following statements describes a limitation associated with break-even analysis?

Accepted Answer

Not all costs are easily categorized because a cost may be fixed when viewed in the short term but variable when considered over a longer period of time.

Question 5

Furr Friends sells kits for making personalized grave markers for pets.The company sells each kit for $22.The average variable cost for each kit is $13,and the total annual fixed costs for plant operation are $78,300.What is the break-even point in units?

Accepted Answer

Break-even quantity equals the total fixed costs ($78,300)divided by the fixed cost contribution per unit ($22 - $13 = $9).

Question 6

Ceylon Express sells bottled pasteurized tea to retailers.It has the following revenues and costs: 
What is the annual break-even point in units for the company?

Accepted Answer

Break-even quantity is the total fixed costs ($50,000)divided by fixed cost contribution per unit ($.20).

Question 7

MusicMatch Central makes reproduction jukeboxes,which it sells to baby boomers for $500.It estimates its average variable costs to be $200 per jukebox.It figures its fixed costs to be $600,000 per year.How many jukeboxes does it have to sell to break even?

Accepted Answer

Break-even quantity equals the total fixed costs ($600,000)divided by the fixed cost contribution per unit ($500-$200 = $300).

Question 8

When Laser Technology developed and introduced a high-tech crash investigation system to be used by law enforcement officers,the company determined that demand for the product was inelastic,and there was no existing competition.What should the pricing strategy for the system be?

Accepted Answer

A high initial price is used when a new product faces little competition,needs to recoup R&D costs,and has inelastic demand.Prices will fall slightly when entering the growth stage.

Question 9

During the off-season,Nestlers,a bed-and-breakfast inn,offers a 25 percent reduction on its weekend rates to entice customers.How is the price reduction being used by the Inn?

Accepted Answer

See the ski resort example in your textbook pg.313.

Question 10

An analyst at Loude Office,a company that makes wooden desks,has calculated the sales volume at which the company's costs equal revenue.This analyst announced at the company's quarterly sales meeting that 13,000 desks at an average cost of $150 must be sold to retail stores during the next quarter to reach this point.Which important factor has been excluded from his analysis?

Accepted Answer

Loude's analyst includes only company costs and does not consider consumer demand.

Question 11

What do many consumers,especially when faced with an uncertain purchase decision,think of a high price?

Accepted Answer

Numerous studies have shown that consumers equate high price with high quality.

Question 12

Regency,Inc.makes disposable cap and gown sets for graduations.Each cap and gown set sells for $15.The average variable cost for manufacturing 10 cap and gown sets is $100.Total fixed costs for the year equal $65,000.Calculate the break-even point in units.

Accepted Answer

Break-even = $65,000/[15 - (100/10)] = 13,000

Question 13

Metro Supermarkets will place well-known brands on the shelves at high prices while offering its own Metro brand at lower prices.What is this practice an example of?

Accepted Answer

Selling against the brand with private labels causes sales of the higher-priced brands to decline.

Question 14

Canning White has decided that the pricing strategy at his sporting goods store will include advertisements offering discounts on the Nesco brand aluminum cooking set for campers. What does this pricing strategy clearly involve?

Accepted Answer

Price is used here as a promotional tool to increase consumer interest

Question 15

Bill Needles makes and sells customized silver belt buckles for $225 each.He has determined that his fixed costs are $8,000,and his average variable costs per buckle are $145.
-Refer to Bill Needles.What is his break-even point in units?

Accepted Answer

($8,000)/($225 - $145)= $100

Question 16

Shopping bots do which of the following?

Accepted Answer

Shopping bots provide a means for comparison shopping, allowing customers to easily compare prices and products from different manufacturers and suppliers. They do not necessarily encourage more creative advertising, link manufacturers and customers in a new way, or create opportunities for prestige pricing.

Question 17

Chulo Ibsen makes and sells hand-forged wrought iron firescreens for $125 each.He has determined that his fixed costs are $8,000,and his average variable costs per firescreen are $45.What is his break-even point in dollars?

Accepted Answer

[$8,000)/($125 - $45)] × $125 = $12,500

Question 18

Which of the following statements about pricing strategies throughout the product life cycle is NOT true?

Accepted Answer

With inelastic demand,prices are set high at introduction.

Question 19

Which of the following best describes when pricing is used as part of a promotion strategy?

Accepted Answer

Pricing can be used as part of trade promotions, such as offering discounts or rebates to retailers or distributors, to incentivize them to promote and sell a product.

Question 20

Which of the following statements best describes the Internet?

Accepted Answer

The Internet has shifted some,but not all,shopping power to consumers.Consumer reviews vary in quality.Fraud is a huge problem.

Quiz 18: Pricing Concepts

Bill Needles makes and sells customized silver belt buckles for $225 each.He has determined that his fixed costs are $8,000,and his average variable costs per buckle are $145. -Refer to Bill Needles.What is his fixed cost contribution per buckle?