Marketing Chapter 13

Front 1

While working towards a target price of $45.00 per widget, Delta Inc., calculated their totalinput costs were $30.00 per widget. Adding $15.00 to the total input costs to arrive at $45.00would be reflective of:

Back 1

cost-plus pricing

Front 2

When it comes to low prices in the eyes of consumers, which of the following statements isTRUE?

Back 2

Consumers may not always perceive lower prices as connoting poorer quality.

Front 3

Rather than billing clients by the hour, some lawyers and their clients agree on a fixed feebased on expected costs plus a profit for the law firm. Which pricing method are they using?

Back 3

cost-plus pricing

Front 4

When Volkswagen first sold their Jetta TDI vehicles, they were manufacturing them in lots of10,000. After realizing the high demand for the vehicle, they increased their manufacturingvolume to lots of 25,000, and, in-turn, lowered the price of the vehicle by $2,500, because ofincreased efficiencies calculated by manufacturing more. By selling at a lower price,Volkswagen is engaging in:

Back 4

Experience curve pricing

Front 5

Which cost-based pricing method holds that a product's unit costs predictably decline by 10 to30 percent each time the firm's production volume doubles?

Back 5

experience curve pricing

Front 6

The retail price of laser printers has decreased from $900 to less than $200 over severalyears. This is due in large part to:

Back 6

experience curve pricing.

Front 7

Target profit pricing is:

Back 7

setting a price based on a specific annual dollar target volume of profit.

Front 8

A custom kitchen cabinet storeowner wishes to use target profit pricing to establish a price fora typical section of cabinets. Assume variable cost is $200 per unit, fixed cost is $44,000, anda target profit of $10,000 on a volume of 400 cabinets is desired. What should be charged fora typical cabinet section?

Back 8

$335.00

Front 9

Lady Marion Seafood, Inc. sells 5-pound packages of Alaska salmon. Assume its variablecosts per package is $30, and its fixed cost is $250,000. It wants a target profit of $38,000 ona volume of 16,000 packages. What should it charge for a 5-pound package of salmon?

Back 9

$48.00

Front 10

The manager of a small gasoline station observes that while gasoline sales have been steady,the service side of the business has fallen off, and mechanics are often idle. He decides tooffer a promotion - an oil change for $10 with a coupon mailed to 800 households in a 2-mileradius from his station. The $10 will just cover the costs of the oil change, and the cost ofprinting and mailing is $1,000. He hopes the promotion will increase regular maintenanceservice calls, which averages to $40. (Materials and labour per job cost $30.) If two hundredcustomers used the coupon, what will be the total cost of the promotion? (Disregard anyopportunity costs.)

Back 10

$1000

Front 11

Sears sets their prices to achieve a 19 percent profit margin on forecasted 2015 sales of$25.8M. This is an example of:

Back 11

target return-on-sales pricing

Front 12

A custom kitchen cabinet storeowner wishes to use target profit pricing to establish a price fora typical section of cabinets. Assume variable cost is $200 per unit, fixed cost is $44,000, andthe storeowner desires a target profit of 20 percent of sales on an annual volume of 400cabinets. What price should be charged for a typical cabinet section?

Back 12

$387.50

Front 13

Suppose a shop owner sets a target ROI of 10 percent, which is twice that achieved theprevious year. She considers raising the average price of a framed picture to $54 or $58—upfrom last year's average of $50. In order to still achieve her target, she might:

Back 13

add value to the framed picture that adds minimal fixed and variable costs, yet consumersare willing to accept

Front 14

Which of the following companies would be most likely to use target return-on-investmentpricing?

Back 14

a public utility

Front 15

Customary pricing is:

Back 15

a method of pricing a product based on tradition, standardized channels of distribution, orother competitive factors.

Front 16

Most consumers expect a litre of milk to cost anywhere between $1-$3 dollars depending on ifit is organic or not. Knowing this consumer expectation, a new dairy will probably chargeconsumers within this price range for their milk. This new dairy is engaging in:

Back 16

Customary pricing

Front 17

Consumers buy candy bars, snacks, and soda pop from vending machines. Traditionally, theprice of each of these products is about 60 cents. If a marketer charges a significantly higherprice for such products dispensed by vending machines, sales are likely to decline. In order toavoid such declines in sales, marketers tend to be very consistent in the price charged forvending machine products. This is an example of marketers employing a _____ strategy.

Back 17

customary pricing

Front 18

Vending machines are a good example of what type of competition-based pricing?

Back 18

customary pricing

Front 19

Southern gardeners have a preconceived idea on what they will pay for pine bark mulch thatthey buy at their local gardening supply store to keep the weeds down in their gardens. If theprice being charged is not within a narrow range that they feel is appropriate, they will makesubstitutions-newspaper, grass clippings, or some other kind of ground covering. When pricingpine bark mulch, a garden supply retailer should use:

Back 19

customary pricing.

Front 20

A Swedish company such as Asko that prides itself on manufacturing and marketing some ofthe best built and most expensive appliances in the world is using which competition-basedmethod of pricing?

Back 20

above-market pricing

Front 21

An ad campaign by Suave shampoo asked television viewers to identify the hair that wasshampooed and conditioned with Suave products and the hair on which expensive salon haircareproducts were used. The idea of the ad was that a person could not tell by looking that awoman was using the much cheaper Suave brand. By making price its selling point, Suave ismost likely using:

Back 21

below-market pricing.

Front 22

‘No-name' products likely use:

Back 22

below-market pricing

Front 23

Loss-leader pricing is:

Back 23

deliberately selling a product below its customary price to attract attention to it.

Front 24

Many retailers deliberately sell products below their normal prices (and sometimes below cost)to attract attention and induce additional store traffic. This strategy is referred to as:

Back 24

loss-leader pricing

Front 25

When Bruno's, a legendary supermarket 10 km north of Toronto, prices rib steaks at $2.29 apound, which is below its cost, it is attempting not to sell steaks, but to:

Back 25

attract customers in hopes they will buy other products as well.

Front 26

A radio advertisement features a female buyer who is very enthusiastic about the pricingpolicies of the Saturn automobile dealers. In the testimonial-type advertisement, the car buyerlaments about the difficulty she experienced with other car dealers in haggling over a finalprice for an auto. In comparison, the buyer touts the ease with which she arrived at a finalprice for her new Saturn automobile-she simply entered the showroom, asked for the price ofthe car she preferred, and the sales person quoted her the selling price. No matter whichSaturn dealer she visited, the buyer (or any other buyer for that matter) would be quoted thesame price for the same automobile. The advertisement represents Saturn's _____ policy.

Back 26

one-price

Front 27

A new Apple iPad 5 is priced at $599.99 regardless of whether it is purchased in California orNew York, or purchased at an Apple Store, online, or at Best Buy. This pricing policy is called:

Back 27

one-price

Front 28

When you buy a Wilson Sting tennis racket from a discount store, you are offered the productat a single price. You can buy it or not, but there is no variation in price under the seller's:

Back 28

one-price policy.

Front 29

The Dollar Giant retail store implemented a policy that nothing will be above $1.00, even ifthey end up selling the item below cost. This strategy is referred to as:

Back 29

fixed pricing

Front 30

When you order a new laptop from Future Shop's online store the price is $550.00. However,when you head to a Future Shop store, you realize that the exact same laptop is priced at$600.00. This pricing discrepancy is referred to as:

Back 30

a flexible-price policy

Front 31

Which of the following statements about a flexible-price policy is NOT true?

Back 31

Also called dynamic pricing, it gives sellers very little discretion in setting final price.

Front 32

What is the main factor that has led to the fact that consumers may not necessarily view lowerpriced products as lower priced?

Back 32

intense competition has led to lower costs

Front 33

When Teresa went into the furniture store to buy a new sleeper sofa, she thought the pricesquoted by the salesperson were too high, so she prepared to leave. As she neared the door,the salesperson asked if she would be interested in buying the sofa if the price was $150lower. Teresa returned to the store, purchased the sofa, and felt like she had gotten a gooddeal. The furniture store uses:

Back 33

a flexible-price policy.

Front 34

Different brands within a company's product line generally have different profit margins; higherprice lines have higher profit margins. For example, Nike Variety tennis shoes have variablecosts of $6 and sell for $24; whereas, Nike Wimbledon tennis shoes have variable costs of$10 and sell for $48. It must be true that:

Back 34

Nike is using a price lining strategy.

Front 35

The use of flexible pricing has grown in popularity because of:

Back 35

increasingly sophisticated information technology

Front 36

When a manager sets prices for all items in a multiple products line to cover the total cost andto produce a profit for the complete line - not necessarily for each item, it is called:

Back 36

product-line pricing.

Front 37

Leupold & Stevens, Inc., a North American manufacturer of rifle scopes, uses a variety ofpricing strategies for its rifle scopes. For some, the company uses above-, at-, or belowmarketpricing to reach as many customers as possible. The company is more concernedabout making a profit for the complete line of its scopes - rather than making a profit on justone item in its product. Leupold & Stevens uses:

Back 37

product-line pricing

Front 38

The Hummer was an attention-getting SUV that sold for $80,000 in a limited number of outlets.Then, General Motors proved the smaller version for $50,000 could be sold in many moreoutlets. To cover costs and reach the market faster, the Hummer 2 shared some parts withother GM cars. To which customer effects did Hummer marketing managers need to payparticular attention?

Back 38

The original Hummer is prestige priced; therefore, the price of Hummer 2 should makesense to customers and reflect differences in the perceived value of the products offered.

Front 39

Toro decided to augment its traditional hardware outlet distribution by also selling through bigdiscounters such as Walmart and Zellers and set prices for the discounters substantially belowthose for its traditional hardware outlets. Many unhappy hardware stores subsequentlyabandoned Toro products in favour of other manufacturers. This is an example of a firm failingto consider _____ effects when setting its final list or quoted price.

Back 39

customer

Front 40

Four types of price discounts are:

Back 40

seasonal, functional, cash, and quantity

Front 41

When GM purchases 500 tonnes of sheet metal for their manufacturing line, the cost is $0.10per tonne. However, when they purchase 750 tonnes, the price becomes $0.05 per tonne. GMis receiving a(n) ____________ from the sheet metal manufacturer.

Back 41

quantity discounts

Front 42

Your local instant photocopying service charges 10 cents a copy for copies up to a quantity of25, 9 cents a copy for 26 to 100, and 8 cents a copy for 101 or more. What kind of adjustmentto list or quoted prices is the photocopying service using?

Back 42

quantity discounts

Front 43

If you buy one pair of Uvex Clear UVExtreme safety eyewear, the cost is $7.40, but if you buyten at one time, the price per pair is reduced to $6.85. This is an example of a:

Back 43

quantity discount.

Front 44

At a local coffee shop, where you frequent, you are enrolled in their frequent-buyer program,where, for every ten coffees you purchase, you get one for free. Essentially, the coffee shop isengaged in offering a(n):

Back 44

quantity discount

Front 45

Mike Morgan, a sales representative for a major distributor of Kodak film, wanted to encouragerepeat purchases by his customers. In order to accomplish this objective, Morgan offered thefollowing discount to his customers:

10-50 cases of film over the next 12 months - a 10 percent discount,51-100 cases of film over the next 12 months - a 12 percent discount,101-200 cases of film over the next 12 months - a 15 percent discount.What type of discount was Morgan offering his customers?

Back 45

a quantity discount

Front 46

Manufacturers use seasonal discounts to:

Back 46

entice dealers to purchase seasonal merchandise earlier in the selling season

Front 47

To encourage buyers to stock inventory earlier than their normal demand would require,manufacturers often use:

Back 47

seasonal discounts.

Front 48

When purchasing which one of the following products would you be likely to receive aseasonal discount?

Back 48

bricks for home construction

Front 49

Trade (functional) discounts are calculated on two criteria. What are the two criteria?

Back 49

Where the reseller is in the channel; the marketing activities the reseller performs in thefuture.

Front 50

The three special adjustments to list or quoted price are:

Back 50

discounts; allowances; geographical adjustments

Front 51

Everyday low pricing (EDLP) is the practice of replacing __________ with lower manufacturerlist prices.

Back 51

promotional allowances

Front 52

A home improvement retailer advertises that it has a popular central vacuum system availablefor $420.00. The ad suggests that the competition's price is $500.00. It was verified that thecompetitors did not offer the central vacuum system at $500.00. What deceptive pricingpractice is the home improvement retailer attempting?

Back 52

comparable value comparison

Front 53

An electronics retailer, "Buy Less" has a price tag on a home theatre system. The price taghas $500.00 crossed out and a new price of $350.00 is shown on the tag. Which deceptivepractice should the retailer be careful not to violate based on this example?

Back 53

former price comparisons

Front 54

John's Ice Cream Company purchases milk and cream from a local dairy farm. The dairyfarm's standard pricing policy is 60 days to receive full payment. However, they offer a 5percent discount on the total purchase price if John's Ice Cream Company pays the fullamount (less discount) within 30 days. This is an example of offering:

Back 54

cash discounts.

Front 55

If an invoice for $45,000 is billed 2/10 net 30, what is the highest annual interest rate that onewould rationally pay to borrow money in order to take advantage of the cash discount if theonly consideration is a lower annual interest rate than charged on the invoice?

Back 55

35.9 percent

Front 56

Rick's Bike Shop allows customers to use a credit card for purchases. The shop pays 3percent of the sale to the credit card company. To promote more business, Rick decides tooffer a lower price to customers paying cash-that price being 3 percent less than the standardlist price. Rick is giving his customers a(n):

Back 56

discount-for-cash.

Front 57

When Sherman bought gas, he noticed the convenience store offered him a 3 percentreduction in price if he paid cash rather than used his credit card. The convenience store wasoffering him a:

Back 57

cash discount.

Front 58

A new-car dealer can offer a substantial reduction in the list price of a new Ford pickup truckby offering you a _____ of $3,000 for your 1988 Camaro

Back 58

trade-in allowance

Front 59

The cash payment or extra amount of "free goods" awarded to sellers in the channel ofdistribution for undertaking certain advertising or selling activities to promote the product is a:

Back 59

promotional allowance.

Front 60

The practice of replacing promotional allowances with lower manufacturer list prices is called

Back 60

everyday low pricing

Front 61

For every ten pallets of watermelon a local grocery store purchases, the farm will include onepallet of cucumbers for free. This is an example of offering a(n):

Back 61

promotional allowance.

Front 62

Which of the following statements about geographical adjustments to price is correct?

Back 62

Basing point pricing seems to have been used in industries where freight expenses are asignificant part of the total cost to the buyer.

Front 63

Geographic adjustments are made by manufacturers or wholesalers to:

Back 63

cover transportation costs.

Front 64

FOB origin pricing is a method of pricing where

Back 64

title of goods passes to the buyer at the point of loading.

Front 65

Central Ice Machine Company is located in Omaha, Nebraska, sells Frick, Sullair, York, andFes Fuller ammonia refrigeration parts. The company ships using FOB origin pricing. Which ofthe following statements about the shipment of a Frick reciprocating compressor is true?

Back 65

A buyer in Albany, New York, will pay significantly more shipping charges than a buyer inLincoln, Nebraska, and Central Ice Machine will pay none.

Front 66

When buyers and sellers are separated by vast distances, geographical adjustments may bemade to reflect the cost of transportation of the products from sellers to buyers. Which methodof quoting prices would be chosen by a seller who wants to maximize profits?

Back 66

FOB origin pricing

Front 67

The fashion buyer for Neiman Marcus is in Italy to view the new collections and to order for thecoming season. In Milan, she negotiates a good price for a quantity of shoes in a range ofsizes and styles at FOB factory. This means that:

Back 67

Neiman Marcus selects the mode of transportation, pays freight charges, and is responsiblefor any damage while the shoes are in transit because title passed to the buyer at the pointof loading.

Front 68

Montreal bases Yellow Pages Group, publisher of the Yellow Pages, suggests that for everydollar an advertiser invests in the Yellow Pages, this will return to them on average twenty sixdollars in sales. The Yellow pages, however suggests that different categories will have higherreturns. Based on this they will charge according to the category. What pricing policy is theYellow Pages following?

Back 68

flexible price policy

Front 69

Uniform delivered pricing means:

Back 69

the price the seller sets includes all transportation costs.

Front 70

Many cruise lines pay the customers airfare to the point of cruise departure. What type of priceadjustment are the cruise lines using?

Back 70

uniform delivered pricing

Front 71

Which of the following statements about the Competition Act is NOT true?

Back 71

Resale price maintenance is legal under the Competition Act

Front 72

All of the major wireless providers in Canada (Bell, Telus, Rogers, Shaw, MTS, and BellAliant) decide that beginning next year all smartphone data plans will be $75 per GB, eventhough their delivery costs are far less. This activity is known as:

Back 72

price fixing.

Front 73

Price fixing is:

Back 73

a conspiracy among firms to set prices for a product.

Front 74

"The customer is our enemy; the competitor is our friend." That's the unofficial world-view of$11-billion-in-sales Archer Daniels Midland (ADM), according to FBI mole-executive MarkWhitacre in an interview. Given this information, which of the following illegal pricing practiceswould ADM have been most likely to engage in?

Back 74

price fixing

Front 75

Mark Johnson, the manager of a discount consumer electronics store, has been approachedby the manufacturer of a popular and profitable line of compact disk storage racks regardingthe retail price charged for the racks at Johnson's store. The manufacturer's representativehas implied that if Johnson doesn't raise the retail prices for the storage racks to thosecharged by the manufacturer's non-discount customers, Johnson's supply of racks may beseverely curtailed. The manufacturer is guilty of attempting:

Back 75

resale price maintenance.

Front 76

In one of its least favourite actions, Amazon.com was caught fiddling with its price tags. AvidBlu-Ray shoppers found that the online store was offering different customers different pricesfor the same Blu-Ray, and complained vociferously. Amazon was caught red-handed. It was,company officials admitted, trying to see how much it could charge for an item beforeshoppers balked. No matter what the reasoning behind it, Amazon.com was using

Back 76

price discrimination.

Front 77

Price discrimination is:

Back 77

the practice of charging different prices to different buyers for goods of like grade andquality.

Front 78

All of the following statements about the Competition Act are true, except:

Back 78

It is easy to prove that price discrimination under the Competition Act has taken place.

Front 79

A hardware store advertises a 3/8" Black & Decker power drill for $29.95. You enter the storeintending to purchase the drill. The salesperson informs you that they are all sold out. She tellsyou that the "sale" drills were factory seconds and that if you are going to be doing any kind ofserious woodworking, you should buy the Model 3309, which sells for $49.99. This scenariohas elements of which type of deceptive pricing?

Back 79

bait and switch

Front 80

Brake-O is a franchise company that repairs brakes in cars and trucks. A radio ad for thecompany warned potential customers to "not fall prey to bait-and-switch schemes." The adwas telling potential customers to:

Back 80

be wary of brake repair services that are priced low because the services may try to sellcustomers a much higher priced service once the customer enters the store.

Front 81

To promote their business, some psychics advertise free tarot card readings and other insightsinto their customers' futures on television. Unfortunately, this "free reading" has cost someunsuspecting callers as much as $700 in phone charges. This sort of deceptive pricingpractice would be monitored by the:

Back 81

Canadian Competition Bureau

Front 82

An established provider of high-definition television service does not like the new startup thathas decided to offer HD television in the same market area. As such, the established providerlowers their prices to half of what the new startup is charging, in hopes of forcing them intobankruptcy. This activity is known as:

Back 82

Predatory pricing

Front 83

In the early 1980s, typical round trip coach fares from the East Coast to London were over$500. Then Freddie Laker introduced a competing service into Newark at $350. Major airlinesmatched his price-and continued to do so until they drove Laker out of business. Then pricesshot back up to over $500. A lawsuit filed under the Sherman Act resulted in the judgment thatthe major airlines had explicitly tried to destroy a competitor. Laker's experience is an exampleof:

Back 83

predatory pricing.

Front 84

Predatory pricing is:

Back 84

the practice of charging a very low price for a product with the intent of driving competitorsout of business.

Front 85

Bob Biltmore owns dozens of very successful print shops throughout the Prairie Provinces.Biltmore's shops specialize in low-cost black and white copies and feature user-friendlymachines consumers can easily operate. In recent months, Biltmore has noticed many morecompetitors in the areas where his stores are located. In an attempt to eliminate thecompetition, Biltmore has decided to charge a very low price for his black and white copies, aprice so low his competitors will be forced out of business. After the competition has beendriven out, Biltmore plans to raise the price of his copies. Biltmore is planning to engage in theillegal practice of:

Back 85

predatory pricing.

Front 86

A primary reason for Washburn's success is

Back 86

developing product lines at different price points for different market segments.

Front 87

Washburn Guitars broke their guitars into four distinct market segments. Each segment wouldbe priced accordingly. Their one-of-kind custom instruments were intended to appeal to

Back 87

stars and famous musicians.

Front 88

Washburn Guitars broke their guitars into four distinct market segments. Each segment wouldbe priced accordingly. Their batch-custom products instruments were intended to appeal to

Back 88

professional musicians

Front 89

Washburn Guitars broke their guitars into four distinct market segments. Each segment wouldbe priced accordingly. Their mass customization instruments were intended to appeal to

Back 89

intermediate skill players who might (or might not) become professional musicians.

Front 90

Washburn Guitars broke their guitars into four distinct market segments. Each segment wouldbe priced accordingly. Their mass-produced instruments were intended to appeal to

Back 90

first-time buyers.

Front 91

The executive vice president of Washburn Guitars has set a sales target of 2,000 units for anew line of guitars. This type of objective is most closely related to a(n) ________ pricingobjective.

Back 91

unit volume

Front 92

The average price Washburn charges for a guitar is $349. This price must cover its averagecosts of $25 for direct materials and $120 in direct labour. It must also cover fixed expenses of$38,000. Assuming everything else stays the same, the company's planned move to Nashville,Tennessee, will reduce its fixed costs by $4,800. This would cause the slope of the total costcurve to __________ and the break-even quantity to __________.

Back 92

stay the same; decrease

Front 93

To reduce the price sensitivity for some of its products, Washburn uses

Back 93

endorsements by internationally known musicians who play Washburn signature guitars