Question 1

In breakeven analysis, the costs that change with the level of production are considered ______ costs.
A) variable
B) recoverable
C) labour
D) fixed

Accepted Answer

Variable costs are costs that change with the level of production, such as raw materials, direct labor, and sales commissions. Fixed costs, on the other hand, remain the same regardless of changes in production levels. Recoverable costs and labor costs do not necessarily change with production levels and are not considered in the context of breakeven analysis.

Question 2

ABC Company tries to set products apart from its competitors by setting a relatively high price compared to its competitors in order to develop and maintain an image of exclusiveness and quality. This type of pricing strategy is referred to as ______.
A) volume objective
B) profitability objective
C) objective of managers
D) prestige pricing

Accepted Answer

Prestige pricing involves setting high prices to create an image of exclusivity and quality, which aligns with ABC Company's pricing strategy. The other options (volume objective, profitability objective, objective of managers) do not accurately describe this pricing strategy.

Question 3

When a pharmaceutical company uses the phrase "ask your doctor" in its ads, the company is using a ______ strategy to appeal directly to the public instead of physicians alone.
A) public relations
B) pulling
C) pushing
D) sales promotion

Accepted Answer

The "ask your doctor" strategy is a pulling strategy, where the company aims to create consumer demand so that consumers will request the product from their doctors, thereby pulling the product through the distribution channel.

Question 4

Assume a company wants to increase its profitability. Which of the following would be inconsistent with the company's objective?
A) Operate more efficiently.
B) Maintain price while increasing the size or amount of the product.
C) Reduce costs.
D) Raise prices.

Accepted Answer

Increasing the size or amount of the product while maintaining the same price would likely reduce profitability, as it increases costs without increasing revenue.

Question 5

Burger King recently announced plans to drop the price of its double-cheese burger from $1.99 to just 99 cents in order to match McDonald's pricing. This is an example of a ______.
A) profitability strategy
B) volume strategy
C) price war
D) prestige objective

Accepted Answer

The answer of Burger King recently announced plans to drop...

Question 6

Promotion that is aimed at the ultimate consumer with the goal of generating demand for the good or service is based on a(n) ______.
A) cooperative strategy
B) pulling strategy
C) pushing strategy
D) emphasis on personal selling

Accepted Answer

A pulling strategy is focused on the ultimate consumer and aims to create demand for the product by promoting its benefits and unique features, thereby 'pulling' the customer towards the product. This is different from a pushing strategy, which relies on pushing the product towards the consumer through channels such as personal selling or trade promotions. A cooperative strategy involves working with other businesses or organizations to achieve a common goal, and while personal selling may be a part of promoting the product, it is not necessarily the focus of a pulling strategy.

Question 7

Assume a product costs $5 each. The variable cost per unit is currently $4, and fixed costs are $25,000. If the company can alter its production method such that variable costs fall to $3.50 and fixed costs rise to $30,000, what will happen to the breakeven point?
A) It will fall.
B) It will rise.
C) It will remain the same.
D) It will rise and fall later.

Accepted Answer

The breakeven point is the level of sales at which the company neither makes a profit nor incurs a loss. It is calculated as follows:

Breakeven point = Fixed costs / (Price - Variable costs)

Using the original numbers:
Breakeven point = $25,000 / ($5 - $4) = 25,000 units

Using the new numbers:
Breakeven point = $30,000 / ($5 - $3.50) = 30,000 units

Comparing the two, we can see that the breakeven point has increased from 25,000 units to 30,000 units. This means that the company would have to sell more units in order to cover its costs and break even. Therefore, the answer is A, the breakeven point will fall.

Question 8

Walmart's pricing objective is based primarily on ______ while a jewellery store's pricing objective is based primarily on ______.
A) profitability; prestige
B) profitability; profitability
C) volume; prestige
D) volume; profitability

Accepted Answer

Walmart focuses on high sales volume with low prices, while jewelry stores often focus on prestige pricing to convey luxury and exclusivity.

Question 9

Volume objectives bases pricing decisions on ______.
A) image goals and status quo pricing
B) supply and demand
C) breakeven analysis
D) market share

Accepted Answer

Volume objectives in pricing focus on increasing or maintaining market share, which involves setting prices to achieve a certain level of sales volume.

Question 10

Which of the following pricing objectives has the most influence on Rolex's pricing strategy?
A) profitability
B) prestige
C) meeting the competition
D) volume

Accepted Answer

The prestige pricing objective has the most influence on Rolex's pricing strategy. Rolex is known for its high-end luxury watches that are associated with wealth and prestige. Therefore, they price their watches at a premium to maintain their exclusive brand image and appeal to their target market of affluent consumers. While profitability and meeting the competition may also factor into Rolex's pricing decisions, these objectives are secondary to the company's focus on maintaining their brand prestige. Volume pricing is not a consideration for Rolex, as they prioritize quality and exclusivity over mass production and sales volume.

Question 11

The two main strategies that can be designed by firms to motivate wholesalers and retailers to push goods or services to their own customers, are______ and______.
A) after sale and on-spot services
B) push and pull strategies
C) cooperative and sales promotion
D) none of the above

Accepted Answer

The two main strategies that can be designed by firms to motivate wholesalers and retailers to push goods or services to their own customers are push and pull strategies. Push strategy involves pushing the products or services to the intermediaries who then push the products to their customers. On the other hand, pull strategy involves creating demand among the end consumers by advertising and other promotional activities, which in turn pull the products through the intermediaries. Therefore, option B is the correct answer. The other options do not correctly describe the two main strategies used to motivate wholesalers and retailers.

Question 12

Business costs that change with the level of production are called ______ costs.
A) inflexible
B) fixed
C) variable
D) production

Accepted Answer

Variable costs are the costs that change with the level of production. They increase as production increases and decrease as production decreases. Example of variable costs are raw materials, direct labor hours, and sales commissions. On the other hand, fixed costs remain constant regardless of the level of production such as rent, salaries, and insurance.

Question 13

In breakeven analysis, total cost is composed of ______.
A) price divided by number of units sold
B) variable costs minus fixed costs
C) total variable costs and total fixed costs
D) total sales minus expenses

Accepted Answer

In breakeven analysis, total cost is composed of both total variable costs (which are costs that vary with the level of output, such as material and labor costs) and total fixed costs (which are costs that remain constant regardless of the level of output, such as rent and salaries). Therefore, the correct answer is C, which includes both total variable and fixed costs. Choices A, B, and D do not reflect the full composition of total cost.

Question 14

Melissa is a marketing manager for the Small Business Network at American Express and regularly sends materials to various companies to participate in credit card promotions. Melissa is employing a ______ strategy.
A) sales promotion
B) pulling
C) public relations
D) pushing

Accepted Answer

Melissa is using a pushing strategy by sending materials directly to different companies as a way to increase sales and promote American Express's credit card.

Question 15

The method of determining the minimum sales volume needed at a certain price level to cover all costs is ______.
A) market share analysis
B) equilibrium pricing
C) return on sales
D) breakeven analysis

Accepted Answer

Breakeven analysis involves calculating the point at which total revenue equals total costs, resulting in neither a profit nor a loss. This point can help determine the minimum sales volume needed to cover all costs at a certain price level. Market share analysis involves examining a company's portion of the market compared to competitors, and is not directly related to determining sales volume needed to cover costs. Equilibrium pricing involves finding the price at which supply and demand are equal, and is not directly related to determining sales volume needed to cover costs. Return on sales measures the profit generated from sales, and does not necessarily take into account all costs.

Question 16

A company adds several features to one of its products, and cuts the price slightly. What is the company's objective, most likely?
A) Increase profits.
B) Meet competition.
C) Increase the prestige of the product.
D) Increase the product's market share.

Accepted Answer

The answer of A company adds several features to one...

Question 17

If you did a breakeven analysis for your firm, it would be possible for you to show management the point at which ______.
A) the firm's fixed costs would climb sharply
B) the firm would not make a profit if it sold additional units
C) profits would be maximized
D) the level of sales that will cover all of the company's costs

Accepted Answer

A breakeven analysis helps determine the level of sales at which a firm will cover all its costs, including both fixed and variable costs, and will not make a profit or loss. Therefore, the correct choice is D.

Question 18

In order to avoid price competition that results in price wars, a firm may adopt all of the following to stay in business, EXCEPT ______.
A) add value to product
B) customer education
C) quality improvement
D) stop production

Accepted Answer

The other options (adding value to product, customer education, and quality improvement) all focus on increasing the perceived value of the product, thereby allowing the company to charge a higher price and avoid engaging in price wars. Stopping production altogether is not a viable solution for staying in business.

Question 19

Albertson's, a large national supermarket chain, bases its pricing strategy primarily on which objective?
A) volume
B) profitability
C) prestige
D) breakeven analysis

Accepted Answer

Albertson's, like many large supermarket chains, typically focuses on volume to drive sales and compete with other retailers by offering competitive prices to attract a large customer base.

Question 20

Generally, business-to-business (B2) products usually favour what type of promotional strategy?
A) pulling strategy
B) push strategy
C) product strategy
D) cooperative strategy

Accepted Answer

B2B products usually involve a limited number of buyers who tend to be professional and knowledgeable about the product. Therefore, businesses tend to use a push strategy to actively promote their product to these specific buyers through various channels, such as sales reps, trade shows, and advertising in industry publications. This helps to increase brand awareness, generate leads, and promote the product's benefits to these targeted buyers.

Quiz 13: Promotion and Pricing Strategies

In breakeven analysis, the costs that change with the level of production are considered ______ costs.

ABC Company tries to set products apart from its competitors by setting a relatively high price compared to its competitors in order to develop and maintain an image of exclusiveness and quality. This type of pricing strategy is referred to as ______.

When a pharmaceutical company uses the phrase "ask your doctor" in its ads, the company is using a ______ strategy to appeal directly to the public instead of physicians alone.

Assume a company wants to increase its profitability. Which of the following would be inconsistent with the company's objective?

Burger King recently announced plans to drop the price of its double-cheese burger from $1.99 to just 99 cents in order to match McDonald's pricing. This is an example of a ______.

Promotion that is aimed at the ultimate consumer with the goal of generating demand for the good or service is based on a(n) ______.

Assume a product costs $5 each. The variable cost per unit is currently $4, and fixed costs are $25,000. If the company can alter its production method such that variable costs fall to $3.50 and fixed costs rise to $30,000, what will happen to the breakeven point?

Walmart's pricing objective is based primarily on while a jewellery store's pricing objective is based primarily on .

Volume objectives bases pricing decisions on ______.

Which of the following pricing objectives has the most influence on Rolex's pricing strategy?

The two main strategies that can be designed by firms to motivate wholesalers and retailers to push goods or services to their own customers, are and.

Business costs that change with the level of production are called ______ costs.

In breakeven analysis, total cost is composed of ______.

Melissa is a marketing manager for the Small Business Network at American Express and regularly sends materials to various companies to participate in credit card promotions. Melissa is employing a ______ strategy.

The method of determining the minimum sales volume needed at a certain price level to cover all costs is ______.

A company adds several features to one of its products, and cuts the price slightly. What is the company's objective, most likely?

If you did a breakeven analysis for your firm, it would be possible for you to show management the point at which ______.

In order to avoid price competition that results in price wars, a firm may adopt all of the following to stay in business, EXCEPT ______.

Albertson's, a large national supermarket chain, bases its pricing strategy primarily on which objective?

Generally, business-to-business (B2) products usually favour what type of promotional strategy?