Marketing, 14e (Kerin)
1) The ________ summarizes the profitability of a business firm for a specific time period,
usually a month, quarter, or year.
A) balance sheet
B) annual report
C) income statement
D) assets-liabilities statement
E) data mine
2) A company’s operating statement is also called a(n)
A) income statement.
B) balance sheet.
C) de facto annual report.
D) assets-liabilities statement.
E) data mine.
3) A company’s operating statement consists of three key elements: sales of the firm’s products
and services, costs incurred in making and selling these products and services, and
A) stock turn rates for its various products.
B) profit or loss.
C) markup on cost.
D) return on investment.
E) bundle pricing options.
4) Which of the following is a sales element of an operating statement?
A) cost of goods sold
B) inventory
C) direct labor
D) returns
E) selling expenses
5) A company’s gross sales may be reduced by
A) the size of the contribution margin.
B) the percentage of markdowns.
C) depreciation and amortization.
D) stock turn rate and the markup percentage.
E) returns or allowances.
6) When Beth purchased diabetic candy from a catalog retailer, she was sent orange- and lemon-
flavored candy coated in dark chocolate. When she called to complain to the catalog retailer, she
was told to keep the candy that was incorrectly sent to her, and that the company would
immediately ship her the correct candy. This incorrectly sent candy would be listed as a(n)
________ on the operating statement for the catalog retailer.
A) product return
B) markdown
C) amortized product
D) liquidity error
E) allowance
7) Gross sales minus returns and allowances for a firm are called its
A) inventory shrinkage.
B) discounted return on investment.
C) gross sales.
D) net sales.
E) gross margin.
8) All of the following are cost elements of an operating statement except which?
A) cost of goods sold
B) inventory
C) returns and allowances
D) direct labor
E) gross margin
9) The total cost of the products sold by a firm during a specified period is referred to as
A) amortization.
B) cost of goods sold.
C) gross sales.
D) net sales.
E) gross margin.
10) The inventory for Jane Westerlund’s picture frame store would include
A) her molding, matting, and glass.
B) her skill in framing prints.
C) her equipment, chairs, tables.
D) her cost of goods sold.
E) her rent and utility expenses.
11) The three major categories of expenses are
A) direct, semi-direct, and indirect.
B) variable, fixed, and semi-variable.
C) external, internal, and societal.
D) manufacturing, promotion, and distribution.
E) selling, administrative, and general.
12) To increase the number of dogs boarding at its facilities, Muntz Kennels mailed coupons to
dog owners who lived within a 25-mile radius of the facility. The printing and postage costs for
the mailing plus the coupon redemptions would appear in which major expense category on the
company’s income statement?
A) general
B) administrative
C) fixed
D) selling
E) variable
13) All of the following are operating ratios used to set a price for an offering except which?
A) stock turns
B) ROI
C) market share
D) markdown
E) markup
14) The ________ is the dollars added to cost of goods sold (COGS) to arrive at the selling price.
A) markup
B) selling price
C) return on investment
D) stock turn rate
E) markdown
15) If Jane Westerlund, owner of a picture frame store, raises the average price of a framed
picture to $100 and the cost of goods sold is $36, what is the percentage markup on selling price?
A) 36 percent
B) 55 percent
C) 64 percent
D) 100 percent
E) 178 percent
16) If Jane Westerlund, owner of a picture frame store, raises the average price of a framed
picture to $80 and the cost of goods sold is $36, what is the percentage markup on cost?
A) 36 percent
B) 55 percent
C) 64 percent
D) 100 percent
E) 182 percent
17) ________ is a reduction in a retail price that is necessary if the items will not sell at the full
selling price to which they have been marked up.
A) Stock turn rate
B) Markdown
C) ROI
D) Markup
E) Net margin
18) When Paulette saw the dress in the store window, she knew two things. She had to own the
dress, and she could not afford it at its current price. As she viewed the dress in the store, she
thought of the dress as her own and believed no one else would buy it. It seems she was right
because no one else did buy it, and the store had to reduce its price by 30 percent in order to
dispose of it. This made it affordable for Paulette, who took advantage of a(n)
A) negative markup.
B) markup elimination.
C) markdown.
D) liquidity reduction.
E) increase in net margin.
19) A retailer of children’s clothing had net sales of $72,000. But to get those sales, she had to
reduce her prices by $2,000. Calculate her markdown.
A) 0.35 percent
B) 2.78 percent
C) 3.50 percent
D) 3.70 percent
E) 26.7 percent
20) The gift shop purchased four sets of Block brand hand-painted stemware expecting to sell all
four at the list price of $24.99. Unfortunately, the demand for the stemware was not as high as
the owner had anticipated. She was only able to sell one at this price. She reduced the price on
the other three sets to $16.49 and was able to sell all three sets. Calculate her markdown
percentage.
A) 0.34 percent
B) 2.78 percent
C) 3.43 percent
D) 27.8 percent
E) 34.2 percent
21) ________ is the financial ratio that measures the ability of a firm to move its inventory
quickly.
A) Markup
B) Selling price
C) Return on investment
D) Stock turn rate
E) Markdown
22) Leon George sold kites at the beach last summer. He invested $2,500 in kites and ended the
season with $100 worth of kite inventory. Calculate his stock turn rate for the summer.
A) 1.0
B) 1.5
C) 2.0
D) 3.0
E) 24.0
23) The ________ is the ratio of net income to the investment used to earn that net income.
A) markup
B) selling margin
C) return on investment
D) return on assets
E) markdown
24) Leon George sold kites at the beach last summer. He invested $2,500 in the venture and
made $1,400 net profit (net income). Calculate his return on investment.
A) 15.6 percent
B) 17.9 percent
C) 29.9 percent
D) 47.0 percent
E) 56.0 percent
25) Rebecca Gollanek makes and sells wooden cooling racks for cakes, cookies, and bread for
$22.50 each. She has invested $4,300 in the venture and made $2,200 in net profit. Calculate her
return on investment.
A) 22.0 percent
B) 43.0 percent
C) 48.8 percent
D) 51.2 percent
E) 195.5 percent