Question 1

Average-cost pricing means adding a reasonable markup to the total cost of a product.

Accepted Answer

Average-cost pricing means adding a reasonable markup to the average cost of a product.

Question 2

The stockturn rate is the number of times the average inventory must turn over to make a profit in a given year.

Accepted Answer

Stockturn rate is the number of times the average inventory is sold in a year.

Question 3

Average-cost pricing guarantees that the firm will earn enough to at least cover its costs.

Accepted Answer

Average-cost pricing does not make allowances for cost variations as output changes.So it's easy to lose money with average-cost pricing.

Question 4

By definition,a markup of $1 on a cost of $2 translates to a markup of 40 percent.

Accepted Answer

Unless otherwise stated,markup (percent)means percentage of selling price.

Question 5

High markups always mean big profits.

Accepted Answer

High markups don't always mean big profits.

Question 6

Average-cost pricing consists of adding a 20 percent markup to the average cost of an item.

Accepted Answer

Average-cost pricing means adding a reasonable markup to the average cost of a product.

Question 7

Cost-oriented approaches are the most common price setting approach.

Accepted Answer

Price setting has two basic approaches,cost-oriented and demand-oriented.Cost-oriented approaches are the most common.

Question 8

A major problem with average-cost pricing is that it does not allow for cost variations at different levels of output.

Accepted Answer

The basic problem with the average-cost approach is that it doesn't consider cost variations at different levels of output.

Question 9

Most retailers and wholesalers set prices by using a different markup percent for each different product carried.

Accepted Answer

Many intermediaries (retailers and wholesalers)select a standard markup percent and then apply it to all their products.

Question 10

A major advantage of average-cost pricing is that it assumes costs remain constant at different levels of output.

Accepted Answer

The basic problem with the average-cost approach is that it doesn't consider cost variations at different levels of output.

Question 11

A markup chain can be used to calculate the price structure in a whole channel.

Accepted Answer

A markup chain is the sequence of markups firms use at different levels in a channel and it determines the price structure in the whole channel.

Question 12

A markup is the dollar amount added to the cost of products to get the selling price.

Accepted Answer

Markup is a dollar amount added to the cost of products to get the selling price.

Question 13

Total fixed costs do not change when output increases.

Accepted Answer

Total fixed cost is the sum of those costs that are fixed in total,no matter how much is produced.

Question 14

A certain item has a production cost of $24.The manufacturer takes a 25 percent markup,the wholesaler takes a 20 percent markup,and the retailer takes a 50 percent markup.The item therefore has a retail selling price of $80.

Accepted Answer

A markup chain is the sequence of markups firms use at different levels in a channel and determines the price structure in the whole channel.The markup is figured on the selling price at each level of the channel.

Question 15

Retailers who earn high profits generally use higher markups than retailers who have low profits.

Accepted Answer

Some retailers try to speed turnover to increase profit,even if this means reducing their markups.The markup combines with the stockturn rate to determine what the product actually earns.

Question 16

A supermarket is bound to expect a higher stockturn rate for fresh fruits and vegetables than for soaps and detergents.

Accepted Answer

A supermarket might expect 20 stockturns for soaps and 70 stockturns for fresh fruits and vegetables.

Question 17

According to the text,markup (percent)means percentage of cost unless otherwise stated.

Accepted Answer

Unless otherwise stated,markup (percent)means the percentage of selling price that is added to the cost to get the selling price.

Question 18

Firms with high markups and low turnover rates may earn lower profits than firms with low markups and high turnover rates.

Accepted Answer