Unformatted text preview: c.
status quo pricing
Profit maximization means setting prices so that total revenue is as large as possible relative to
KEY: CB&E Model Pricing OBJ: 19-2 TOP: AACSB Reflective MSC: BLOOMS Application 13. When Insight Research Associates quotes a marketing research project, management will first estimate the cost to conduct the research and produce and deliver the final client report. The next
step in determining the price is to add 30 percent to that cost estimate. This becomes the price
estimate given to the potential research client. This suggests that Insight Research Associates uses
a(n) _____ pricing objective.
market share maximization
Target return on investment is one of the most common types of profit-oriented pricing
KEY: CB&E Model Pricing OBJ: 19-2 TOP: AACSB Reflective MSC: BLOOMS Application 14. Thompson Pool and Patio is known for quality pool installations, excellent customer service, and
reasonable prices. If you want to have a Thompson pool, you will have to wait about six months
due to demand for their product. While Thompson could probably price its product higher, given
the demand, they don’t. Instead, the company sets its price so that it will earn a reasonable level
of profits. Thompson seems to base its pricing policy on:
earning satisfactory profits
creating retained earnings
making the most money as possible
decreasing consumer demand
The objective of satisfactory profits is characterized by seeking a level of profits that is
satisfactory to management and owner(s).
KEY: CB&E Model Pricing OBJ: 19-2 TOP: AACSB Reflective MSC: BLOOMS Application 15. _____ is equal to net profit after taxes divided by total assets.
Return on investment
Economic order quantity
This is the definition of return on investment (ROI).
KEY: CB&E Model Pricing OBJ: 19-2 TOP: AACSB Reflective MSC: BLOOMS Knowledge 16. Pierre’s Ice Cream Company produces ultra-rich ice cream, which it sells in the Cleveland, Ohio,
area. Last year, it managed to exceed its target return on investment (ROI) for the current fiscal
year. The following results were found on its financial statements:
Net profits after tax:
What was the actual ROI for Parrish Farms?
e. Total assets:
Owner’s equity: $500,000
$300,000 6.67 percent
100 percent ANS: B
ROI is net profits after taxes divided by total assets: $50,000 ÷ 500,000 = 10 percent.
KEY: CB&E Model Pricing OBJ: 19-2
TOP: AACSB Analytic
MSC: BLOOMS Analysis 17. Sherrie...
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This document was uploaded on 09/29/2013.
- Fall '13