Question 1

If a company decides to divide its market area into segments or regions and charge a flat rate for freight to all customers in a given region,what type of pricing is the company using?
A) freight absorption
B) basing-point
C) zone
D) uniform delivered

Accepted Answer

This type of pricing is known as zone pricing, where the market area is divided into segments or zones, and a flat rate is charged for freight to all customers in a given zone. This method of pricing is used to simplify the shipping process and make it more predictable for customers.

Question 2

What are cash refunds given for the purchase of a product during a specific period?
A) reciprocal allowances
B) rebates
C) demand discounts
D) promotional allowances

Accepted Answer

Cash refunds given for the purchase of a product during a specific period are generally referred to as rebates.

Question 3

If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased,you know that it is using which of the following pricing?
A) freight absorption
B) uniform delivered
C) zone
D) FOB origin

Accepted Answer

Uniform delivered pricing charges a flat rate for shipping regardless of distance or location, based on the dollar amount of merchandise purchased. This is different from zone pricing, which varies the shipping cost based on the distance from the distribution center, and FOB origin, which places the responsibility for paying freight costs on the buyer. Freight absorption refers to the seller paying for shipping costs, which is not the case in this scenario.

Question 4

A Toronto-based catalogue retailer features cast-iron skillets.Its customers in New Brunswick are charged one shipping rate,and customers in B.C.are charged a different rate.Customers in Quebec are charged yet another rate.What kind of geographical pricing is the catalogue using?
A) zone pricing
B) FOB origin pricing
C) freight absorption pricing
D) FOB factory

Accepted Answer

The catalogue retailer is using zone pricing, where different geographic regions are charged different shipping rates based on their location.

Question 5

One price tactic requires the purchaser to absorb the freight costs from the shipping point.In this case,the farther buyers are from sellers,the more they pay because transportation costs generally increase with the distance merchandise is shipped.What is being described?
A) uniform delivered pricing
B) FOB origin pricing
C) zone pricing
D) freight absorption pricing

Accepted Answer

FOB (Free On Board) origin pricing means that the buyer takes responsibility for the goods once they leave the seller's premises, including paying for the shipping costs. This results in buyers paying more if they are located further from the seller due to higher transportation costs.

Question 6

When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution,the compensation,usually in the form of a discount from base price,is called which of the following?
A) a functional (or trade)discount
B) a rebate or refund
C) a promotional allowance
D) a cumulative or noncumulative quantity discount

Accepted Answer

A functional discount is specifically designed to compensate intermediaries for performing their regular distribution tasks, such as ordering, inventory management, and shipping. This discount is usually a percentage deducted from the list price or base price of the product. It reflects the intermediary's contribution to the channel by performing routine functions that add value to the product. Therefore, Option A is the best choice.

B) A rebate or refund is a type of pricing tactic in which the amount paid by the customer is partially or fully returned to them after the purchase. This is not compensation for intermediaries.

C) A promotional allowance is provided by manufacturers to intermediaries for undertaking promotional activities such as advertising or providing shelf space for their products. This is not compensation for regular services provided by intermediaries.

D) Cumulative and noncumulative quantity discounts are given to customers who buy large quantities of goods or services. They are not related to compensating intermediaries for their services.

Question 7

Shipping fresh-cut flowers to international buyers can be risky because of price changes during the time required for shipment,expense incurred over long distances,and quality of product delivered.To minimize costs,what would a seller likely employ?
A) basing-point pricing
B) freight absorption pricing
C) FOB origin pricing
D) uniform delivered pricing

Accepted Answer

FOB origin pricing means that the buyer is responsible for paying the shipping costs and assumes the risk of any price changes during shipment. This would minimize costs for the seller and shift the risk to the buyer.

Question 8

With which of the following does the seller pay the actual freight charges and bill every purchase with an identical,flat freight charge?
A) uniform delivered pricing
B) FOB origin pricing
C) basing-point pricing
D) freight absorption pricing

Accepted Answer

With uniform delivered pricing, the seller pays the actual freight charges and bills every purchase with an identical, flat freight charge. This eliminates the variability of freight charges for customers and simplifies pricing for the seller. FOB origin pricing means the buyer pays the freight charges, basing-point pricing means a base point is established and all freight charges are based on that point, and freight absorption pricing means the seller absorbs all or a portion of the freight charges as a marketing strategy.

Question 9

Supposed a firm is customer-driven and seeks to understand the attributes customers want in the goods and services they buy and the value customers contribute to those attributes.The firm sets the price of the product at a level that seems to the customer to be a good price compared with the prices of other options.What is this pricing?
A) price
B) value-based
C) market concept
D) noncumulative

Accepted Answer

This pricing strategy is known as value-based pricing, where the firm considers the perceived value of the product or service by the customer in setting the price, rather than just basing it on production costs or competitor prices. The focus is on creating value for the customer and capturing a fair share of that value in the form of profits.

Question 10

What is a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round?
A) a base allowance
B) a promotional allowance
C) a seasonal discount
D) a quantity discount

Accepted Answer

A seasonal discount is a price reduction given to buyers for purchasing goods or services out of season. This allows manufacturers to keep production levels steady throughout the year by encouraging purchases during off-peak times, effectively shifting the storage burden to the purchaser.

Question 11

When the salesperson from R.W.Hunt & Sons,a distributor of rifles and other items needed for hunting or target practice,calls on retail sporting goods stores,she is authorized to offer the retailers a 15 percent discount from the list price in recognition of activities retailers perform for the distributor.These activities include unpacking,floor display setup,and a repair service.What is this 15 percent discount called?
A) a trade discount
B) a quantity discount
C) a promotional allowance
D) a channel allowance

Accepted Answer

The 15 percent discount offered by R.W. Hunt & Sons to retail sporting goods stores is a trade discount. This type of discount is offered by a manufacturer or distributor to a retailer in recognition of specific services or functions performed by the retailer, such as unpacking, displaying, and repairing products.

Question 12

What does uniform delivered pricing enable a firm to do?
A) maintain a nationally advertised price
B) charge each customer the actual cost of shipping its products
C) charge each customer its fair share of the cost of shipping
D) discriminate in favour of buyers that are geographically closer to the seller

Accepted Answer

Uniform delivered pricing allows a firm to maintain a nationally advertised price because it charges the same price to all customers regardless of their location, making it easier to advertise a single price for a product across the country.

Question 13

What is the basic assumption behind value-based pricing?
A) Consumers are more concerned about price than quality.
B) Additional long-term costs to manufacturers will increase.
C) Increased profitability for wholesalers will increase the number of services they are willing to perform.
D) The firm is both customer-driven and competitor-driven.

Accepted Answer

The basic assumption behind value-based pricing is that the firm has a customer-driven and competitor-driven approach. This means that the firm considers the perceived value of the product or service by the customer and the pricing strategies of competitors to determine the optimal price for their product or service. Value-based pricing assumes that customers are willing to pay a higher price for a product or service that offers them greater benefits or value compared to other products in the market. It also assumes that the firm can achieve increased profitability by offering a differentiated product or service that is priced based on its perceived value to the customer. Hence, option D is the correct answer. Options A, B, and C are not relevant to the basic assumption behind value-based pricing.

Question 14

When a coffee shop in a suburban mall and an upscale cafe in a luxury hotel charge different prices for the same cup of coffee served to customers who find the atmosphere in the hotel worth the difference,what is the pricing method used?
A) demand-based
B) break-even
C) value-based
D) cost-based

Accepted Answer

This scenario describes value-based pricing, where the price is determined by how much value customers place on the product, in this case, the atmosphere of the upscale cafe justifying a higher price for the same cup of coffee.

Question 15

Which of the following BEST describes uniform delivered pricing?
A) It is prevalent in the steel,cement,corn oil,and lead industries.
B) It is common where freight costs are a large portion of total costs.
C) It is sometimes called "postage stamp pricing."
D) It creates no geographical price discrimination.

Accepted Answer

Uniform delivered pricing is sometimes referred to as "postage stamp pricing" because it involves charging the same price to all customers regardless of their location, similar to how a postage stamp costs the same regardless of the delivery distance.

Question 16

Which of the following uses buyers' perceptions of a product's worth,not the sellers' costs,as the basis of pricing?
A) price elasticity
B) demand management
C) everyday low pricing
D) value-based pricing

Accepted Answer

Value-based pricing uses buyers' perceptions of a product's worth as the basis of pricing. It doesn't consider the seller's costs or competitors' prices. The price is set based on the value the product provides to the customer.

Question 17

When Janeka purchased a pair of walkie-talkies so she could stay in contact with her 10-year-old son when he was playing in the neighbourhood,she noticed that if she mailed the manufacturer a proof-of-purchase and the cash register receipt showing where and when she had purchased the two-way radio system and how much she had paid,she would receive a cheque for $25.What is this $25 an example of?
A) a rebate
B) a trade promotion
C) a cash discount
D) a reciprocal allowance

Accepted Answer

A rebate is a partial refund of the purchase price offered by the manufacturer after the purchase of a product. In this case, Janeka is being offered a $25 rebate for her purchase of walkie-talkies, which she can claim by mailing the proof-of-purchase and receipt to the manufacturer. Therefore, option A is the correct answer.

Question 18

FOB is an acronym for which of the following?
A) first on board
B) free on board
C) freight on board
D) fee on buyer

Accepted Answer

FOB stands for "free on board," which indicates that the seller is responsible for the cost of delivering the goods to the port of shipment and loading them onto the vessel. Once the goods are loaded, the risk of loss or damage transfers from the seller to the buyer.

Question 19

When a customer of Vegas Sign Company chooses to pay immediately on delivery rather than wait to be billed in 30 days,the buyer receives a 5 percent discount.What is this 5 percent discount an example of?
A) a rebate
B) a promotional allowance
C) a cash discount
D) a functional discount

Accepted Answer

The 5 percent discount given for paying immediately on delivery is an example of a cash discount, which is a reduction in the purchase price offered to a buyer as an incentive to pay for an invoice early. This type of discount is often used to encourage prompt payment and improve cash flow for the seller.

Question 20

A June sale on chocolate eggs,an Easter staple for many people,is an example of which of the following pricing tactics?
A) a promotional allowance
B) a functional discount
C) a quantity discount
D) a seasonal discount

Accepted Answer

The June sale on chocolate eggs, which is typically associated with Easter, is an example of a seasonal discount. The price reduction is offered during a specific time of year in order to increase demand and sales for a certain product or service.

Quiz 17: Setting the Right Price

If a company decides to divide its market area into segments or regions and charge a flat rate for freight to all customers in a given region,what type of pricing is the company using?

What are cash refunds given for the purchase of a product during a specific period?

If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased,you know that it is using which of the following pricing?

A Toronto-based catalogue retailer features cast-iron skillets.Its customers in New Brunswick are charged one shipping rate,and customers in B.C.are charged a different rate.Customers in Quebec are charged yet another rate.What kind of geographical pricing is the catalogue using?

One price tactic requires the purchaser to absorb the freight costs from the shipping point.In this case,the farther buyers are from sellers,the more they pay because transportation costs generally increase with the distance merchandise is shipped.What is being described?

When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution,the compensation,usually in the form of a discount from base price,is called which of the following?

Shipping fresh-cut flowers to international buyers can be risky because of price changes during the time required for shipment,expense incurred over long distances,and quality of product delivered.To minimize costs,what would a seller likely employ?

With which of the following does the seller pay the actual freight charges and bill every purchase with an identical,flat freight charge?

What is a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round?

What does uniform delivered pricing enable a firm to do?

What is the basic assumption behind value-based pricing?

When a coffee shop in a suburban mall and an upscale cafe in a luxury hotel charge different prices for the same cup of coffee served to customers who find the atmosphere in the hotel worth the difference,what is the pricing method used?

Which of the following BEST describes uniform delivered pricing?

Which of the following uses buyers' perceptions of a product's worth,not the sellers' costs,as the basis of pricing?

FOB is an acronym for which of the following?

When a customer of Vegas Sign Company chooses to pay immediately on delivery rather than wait to be billed in 30 days,the buyer receives a 5 percent discount.What is this 5 percent discount an example of?

A June sale on chocolate eggs,an Easter staple for many people,is an example of which of the following pricing tactics?