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Unformatted text preview: ur and sugar
Ovens used for cooking cakes
Interest payments to the bank
Only the consumption of flour and sugar would vary from cake to cake.
KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB Reflective MSC: BLOOMS Application 115. Refer to Specialty Cakes. To set the price of her cakes, Cecilia simply doubles her costs, which
often include several hours of labor and expensive raw materials. This method of price setting is
The practice of marking prices up 100 percent is called keystoning.
KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB Reflective MSC: BLOOMS Application 116. Refer to Specialty Cakes. There are many occasions for which people may need to buy a cake, but
most people do not have the time or interest to learn about cakes and their bakers. These people
who do not know about the quality of the Cecilia Villaveces Cakes might choose them because
equate price and quality
know cakes are in the mature stage of their
product life cycle
realize that this is a monopolistic industry
believe that there is not a relationship between
price and quality
desire value-added services ANS: A
Most consumers equate price and quality.
KEY: CB&E Model Pricing OBJ: 19-6 TOP: AACSB Reflective MSC: BLOOMS Application American Girl Doll
The American Girl catalog began as a concept to introduce today’s girls to those who lived in the
past. Each historically accurate doll is carefully crafted and dressed and has books to describe her
life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story
begins with her long sea voyage from Sweden. The basic doll, dressed in a calico dress and
striped apron plus the hardcover story of how she got to Minnesota, costs $90.00. Six more
hardback books of Kristen’s life are available for $74.95. Kristen’s nightgown costs $20.00, and a
matching one for the doll owner is an additional $38.00. Buy both together and the price is only
$50.00. A hand-painted wooden bed and trunk for Kristen are available for $213.00. Shipping
costs vary with the price of the merchandise ordered.
117. Refer to American Girl Doll. What is the revenue to American Girl if it sells 20 basic Kristen doll
Revenue equals price times number of items sold.
KEY: CB&E Model Pricing OBJ: 19-1 TOP: AACSB Reflective MSC: BLOOMS Analysis 118. Refer to American Girl Doll. American Girl is the primary seller of historically accurate dolls
with accompanying books in a market where there is very little competition. It has no cash flow
problems and is not interested in maximizing its sales. From this information, you should know
American Girl has _____ pricing objectives.
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- Fall '13