44) ________ is an analytical tool that enables retailers to know the number of units they need to
sell to begin making a profit.
A) Yield management
B) Break-even analysis
C) Keystoning
D) Price lining
E) Cost-plus pricing
45) Which of the following is an example of a fixed cost for a bridal gown shop?
A) The services of the seamstress to fit each gown
B) The cost associated with dying the shoes to match the bridesmaids’ dresses
C) The cost associated with the layaway of variously priced gowns
D) The cost of the mannequin used to display current gowns
E) The cost associated with a generous return policy
46) Eunice buys a worm farm. She plans to sell a small carton of worms to people who want to fish
for $3. Her fixed costs are $1,201, and her variable cost for each carton sold is $.75. How many
cartons of worms does Eunice need to sell to reach her break-even quantity?
A) 2712
B) 321
C) 400
D) 534
E) 888
47) Ferdinand runs a pie shop in a busy metropolis. He sells his fresh pies for $7, but it costs him
$2.50 to make them. The cooking equipment in his shop cost him $46,000. How many pies does
Ferdinand need to sell to make $50,000 annually?
A) 33,000 pies
B) 16,000 pies
C) 8,500 pies
D) 21,333 pies
E) 12,645 pies
48) Which of the following is an example of a variable cost for a retailer of electronic equipment?
A) The display tables for mounting the computer, monitor, and printer
B) The cost associated with the free pack of paper for every computer printer sold
C) The store rent charged by the mall
D) The cost of obtaining the licenses required by the local government
E) The cost of manufacturing the electronic equipment
49) Reductions in the initial retail prices are known as
A) rain checks.
B) fixed costs.
C) markdowns.
D) variable costs.
E) keystoning prices.
50) Which of the following statements describes a situation in which markdowns would not be
appropriate?
A) Markdowns would be appropriate on a pair of pillows that had been part of a display and were
showing light wear.
B) Markdowns would be an appropriate pricing strategy for winter parkas that are still in stock in
March.
C) Markdowns would be appropriate for licensed merchandise supporting a movie that was not as
popular as predicted.
D) Markdowns would be appropriate for national brand merchandise that was priced 15 percent
lower in a neighboring competing store.
E) Markdowns would be appropriate for a group of T-shirts that have a higher turnover than other
T-shirts in the department.
51) Which of the following statements is not true of markdowns?
A) Markdowns are part of the cost of doing business, and thus buyers plan for them.
B) A buyer’s objective is to minimize markdowns.
C) Retailers have a set of arbitrary rules for taking markdowns.
D) Buyers employ markdowns to promote merchandise and increase sales.
E) Markdowns can increase customer traffic flow.
52) Which of the following statements on markdowns is false?
A) Markdowns are an unnecessary part of business if planned correctly.
B) Markdowns are an opportunity to increase sales.
C) Promotional markdowns increase customer flow.
D) If markdowns are too low, the buyer may be not purchasing enough merchandise.
E) If markdowns are too low, the buyer may be pricing their merchandise too low.
53) Which of the following statements is a limitation of the rule-based approach to taking
markdowns?
A) The rule-based approach is based upon gross margin.
B) The approach prohibits input from the vendor.
C) The approach does not follow a fixed schedule.
D) It does not consider the demand for merchandise at different price points.
E) The approach assumes that items in a category do not exhibit the same behavior.
54) How does optimization software help retailers in taking markdowns?
A) It gives retailers the point at which it is optimal to job-out and consolidate.
B) It updates pricing based upon actual sales and factors in differences in price sensitivities.
C) It continually updates buyers on sales by price beginning at the point of sale.
D) It dictates markdown merchandise into one percentage markdown per week in the store.
E) It indicates markdowns based on how long the merchandise has been in the store.
55) When making a good markdown decision, a retailer should
A) work closely with its vendors and share the financial burden of the markdowns.
B) only trust its own tastes and intuitions when stocking merchandise.
C) rely exclusively on computer software designed for optimal pricing.
D) consider only the rules-based approach because it has proven its reliability.
E) look to limit markdowns as they hinder customer loyalty.
56) Some retailers liquidate end-of-season merchandise to retailers like TJ Maxx, who in return
sell it at a deep discount. What is the benefit to the retailer who liquidates merchandise using this
strategy?
A) The retailer is able to replace the merchandise with other markdowns.
B) It helps retailers recoup a percentage of the merchandise cost.
C) It is a profitable way for retailers to get rid of undesirable merchandise.
D) The retailer can consolidate the merchandise.
E) It lowers the reputation of the company who purchases the liquidated merchandise.
57) Which of the following statements does not describe a benefit of markdowns for a retailer?
A) Markdowns generate cash flow to pay for new merchandise.
B) It is a way to make room for new merchandise.
C) It rids the store of obsolete merchandise.
D) It increases customer traffic.
E) It is a way to gain a higher gross margin.
58) Jenny runs a produce stand in an inner-city neighborhood. With the recent layoffs, she has
become popular because she gives her day-old produce to the local charity. Which of the following
benefits does Jenny gain by donating produce to the local charity?
A) It requires extra record keeping and transportation costs.
B) It offers her strong public relations benefits.
C) She needs to allocate separate space for her clearance merchandise.
D) She can recover a small percentage of the merchandise’s cost.
E) The keystone price can be deducted from her income.
59) Which of the following is not a viable strategy for liquidating markdown merchandise?
A) Sell to another retailer.
B) Consolidate unsold merchandise.
C) Adopt a keystoning strategy.
D) Sell at Internet auction.
E) Return to vendor.
60) Which of the following is the least profitable method of liquidating markdown merchandise?
A) Sell the merchandise to another retailer.
B) Consolidate the unsold merchandise.
C) Place the remaining merchandise on an Internet auction site.
D) Give the merchandise to charity.
E) Carry the merchandise over to the next season.
61) Manuel’s vacation to Chicago for $1,000 for three nights in a four-star hotel on Michigan
Avenue included airfare and accommodation. If these services were availed individually, it would
have been more expensive. This form of pricing is referred to as
A) odd pricing.
B) zone pricing.
C) leader pricing.
D) price bundling.
E) variable bundling.
62) ________ is the practice of offering two or more different products or services for sale at one
price.
A) Price bundling
B) Psychological pricing
C) Price grouping
D) Conjoint bundling
E) Price lining
63) A travel brochure shows that a couple can buy a round trip ticket to Orlando, a three-day pass
to Disney World, car rental for four days, and hotel accommodations for 5 nights for $1200 per
person. These services are more expensive when availed individually. This offer is an example of
A) price lining.
B) psychological pricing.
C) bait and switch bundling.
D) price bundling.
E) conjoint pricing.
64) What is the potential byproduct of promotional markdowns?
A) It is a way of achieving a break-even point.
B) Promotional markdowns benefit customers because they are charged according to their
willingness to pay.
C) Retailers aim to get rid of unwanted merchandise through promotional markdowns.
D) The increased in-store traffic can lead to the purchase of other products at regular prices.
E) Buyers are benefitted because they are charged according to the market segment to which they
belong.
65) Giant, a retail store, is offering two 6-packs of beer for $14.50. The price for a single 6-pack is
$8.69. What pricing strategy is Giant using?
A) Price lining
B) Multiple-unit pricing
C) Psychological pricing
D) Price bundling
E) Conjoint pricing