Marketing Final Exam

Use of resources pts 1 ref 308 communication key cbe

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Unformatted text preview: been recently discovered by manufacturers as a way to make more efficient use of resources. PTS: 1 REF: 308 Communication KEY: CB&E Model Pricing OBJ: 19-4 TOP: AACSB MSC: BLOOMS Synthesis 10. What are the problems associated with the use of a cost-based pricing strategy? What contribution does cost make to the setting of prices? ANS: Setting prices based solely on costs ignores demand and other important factors such as marketing mix components or consumer needs and wants. Prices determined strictly on the basis of cost may be too high for the target market, thereby reducing or eliminating sales. Cost-based prices may also be too low, causing the firm to earn a lower return than it should. Costs play an important role in price setting, however. Costs serve as floor below which a good or service must not be priced in the long run. PTS: 1 REF: 309 Communication KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB MSC: BLOOMS Synthesis 11. What is the difference between fixed and variable costs? Give examples of each type of cost. ANS: FIXED COSTS are those expenses of the firm that are stable and do not change with the level of output. Examples include rent and executive salaries. VARIABLE COSTS are those expenses of the firm that vary directly with the level of output. Examples of variable costs associated with output include cost of materials, direct labor, and packaging. PTS: 1 REF: 309 Communication KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB MSC: BLOOMS Synthesis 12. Calculate answers for the following scenarios if retailer markups are based on their selling price: a. A retailer sells a set of measuring cups for $2.50 after adding $0.50 to the original cost. What is the markup percentage? b. The cost of a food blender for the retailer is $40 and the retailer applies a markup of $60. What is the retail markup percentage? c. A retailer marks up all products by 20 percent. If a set of glasses costs the retailer $10, what will be the final selling price? d. A retailer marks up all products by 75 percent. If the selling price of a set of plastic bowls is $4, what was the cost to the retailer? ANS: The dollar markup is calculated as selling price minus cost, and percentage markup can be calculated by dividing dollar markup by selling price. a. Dollar markup ÷ Selling price = Percent markup $0.50 ÷ $2.50 = 20% b. (Dollar markup + Cost) = Selling price Dollar markup ÷ Selling price = Percent markup $60 ÷ ($60 + $40) = 60% c. Dollar markup = (Selling price – Cost) (Selling price – Cost) ÷ Selling price = Percent markup (S – $10) ÷ S = .20 (S – $10) = .20S $10 = .80S Selling price = $12.50 d. (Selling price – Cost) ÷ Selling price = Percent markup ($4 – C) ÷ $4 = .75 ($4 – C) = (.75 x $4) C = $4 – $3 = $1 PTS: 1 REF: 310-311 OBJ: 19-5 TOP: AACSB Analytic | AACSB Communication MSC: BLOOMS Synthesis KEY: CB&E Model Pricing 13. What is marginal revenue? Based on the provided schedule from the Chesapeake Bay Swing Company, at w...
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