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CLEP Principles of Marketing Study Notes

Otherwise the entire balance is due within 30 days

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net 30 means that a 2 percent discount will be allowed if the account is paid within 10 days. Otherwise, the entire balance is due within 30 days and there is no discount. After 30 days, interest may be charged. 4. Seasonal Discount - price reduction to buyers who purchase goods or services out of season. Allow the seller to maintain production during the year. 5. An allowance - reduction in price to achieve a desired goal--often to help give the buyer the ability to make the new purchase. May be a trade-in allowance, making financing a purchase easier by allowing the buyer to turn in a used item when purchasing a new one. Another type of allowance is the Promotional Allowance , which is a price reduction granted to dealers for participating in programs to increase sales of a particular item. Personal Selling - success is determined by closing a sale. Salesperson must "close" the sale, or in other words, ask the prospect to buy the product. The salesperson could have a very effective sales presentation, but if he doesn't make an attempt to close the sale at the end of his meeting with the prospect, he is making a critical mistake. The Break-Even point is the point at which the costs of producing a product equal the revenue made from selling the product. Knowing the number of units necessary to break even is important in setting the price. When sales exceed the break-even point, each successive unit sold generates profit . Break-Even Analysis is a pricing technique that determines the number of products that a firm must sell at a specified price in order to generate enough revenue to cover total cost. Involves calculating break-even points for several alternative prices. It is not used solely for calculating prices, but can be used to identify highly undesirable price alternatives that should be avoided. The Total Revenue is calculated by multiplying Price by Quantity Sold. Fixed Cost is the cost that does not vary with changes in the number of units produced or sold. Costs associated with production that do not change depending on how many units the firm produces or sells. For example, the rent for using an office building or a factory is a fixed cost.
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Variable costs vary directly with changes in the number of units produced or sold. Costs that change depending on how many units of a product a firm produces or sells. For example, producing more units often means paying more wages because workers are working longer hours. Break-Even Point is calculated by dividing the Fixed Costs by the Per Unit Contribution to Fixed Costs. Per Unit Contribution is another way of saying how much money you make from selling one unit after subtracting the variable costs associated with producing that one unit. If you sell a brush for $5, and the variable costs for producing that brush was $3, then your Per Unit Contribution is $2.
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