116) Cost-plus-percentage-of-cost pricing refers to
A) summing the total unit cost of providing a product or service and adding a specific amount to
the cost to arrive at the price.
B) adding a fixed percentage to the cost of all items in a specific product class.
C) setting a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors.
D) setting the price of a product or service by adding a fixed percentage to the total unit cost.
E) charging different prices to different buyers for goods of like grade and quality.
117) Which of the following type of business is most likely to use cost-plus-percentage-of-cost
pricing?
A) real estate agency
B) insurance company
C) power company
D) grocery store
E) architect
118) Cost-plus-percentage-of-cost pricing refers to
A) summing the total unit cost of providing a product or service and adding a specific amount to
the cost to arrive at the price.
B) adding a fixed percentage to the cost of all items in a specific product class.
C) setting a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors.
D) setting the price of a product or service by adding a fixed percentage to the total unit cost.
E) charging different prices to different buyers for goods of like grade and quality.
119) When buying highly technical, few-of-a-kind products such as hydroelectric power plants,
governments have found that general contractors are reluctant to specify a formal, fixed price for
the procurement. Therefore, these contractors use ________ to compensate them for any cost
overruns.
A) at-market pricing
B) experience curve pricing
C) cost-plus-fixed-fee pricing
D) standard markup pricing
E) yield management pricing
120) What pricing strategy did the National Aeronautics and Space Administration (NASA) use to
pay Lockheed Martin for the Orion lunar spacecraft?
A) cost-plus-percentage-of-cost pricing
B) experience curve pricing
C) standard markup pricing
D) yield management pricing
E) cost-plus-fixed-fee pricing
121) The Brazilian government wants to build a global positioning satellite (GPS) system. The
satellite manufacturer will receive a mutually agreed upon profit over and above all costs
associated with the project. The pricing approach the satellite manufacturer uses is called
A) standard markup pricing.
B) experience curve pricing.
C) cost-plus-percentage-of-cost pricing.
D) cost-plus-fixed-fee pricing.
E) bundle pricing.
122) The most commonly used pricing method for business products is
A) target return on investment.
B) customary.
C) standard markup.
D) target profit.
E) cost-plus pricing.
123) Architectural firms that specialize in designing and constructing one-of-a-kind custom
buildings such as the Rock and Roll Hall of Fame often use which pricing strategy?
A) cost-plus pricing
B) experience curve pricing
C) standard markup pricing
D) yield management pricing
E) price lining
124) Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee
based on expected costs plus an agreed upon level of profit for the law firm. Which pricing
approach are they using?
A) target pricing
B) cost-plus pricing
C) customary pricing
D) experience curve pricing
E) bundle pricing
125) Which of the following is a profit-oriented approach to pricing?
A) penetration pricing
B) target pricing
C) loss-leader pricing
D) target return-on-investment pricing
E) standard markup pricing
126) All of the following are profit-oriented approaches to select an approximate price level except
which?
A) target ROI pricing
B) target profit pricing
C) target return-on-sales pricing
D) target return-on-investment pricing
E) cost-plus-percentage-of-cost pricing
127) With profit-oriented approaches to pricing, a price setter may choose to balance both
________ and ________ to set price.
A) revenues; profit
B) tangible goods; services
C) costs; revenues
D) demand; supply
E) costs; demand
128) Target profit pricing refers to
A) adjusting the price of a product so it is “in line” with that of its largest competitor.
B) setting an annual target of a specific dollar volume of profit.
C) setting the price of a line of products at a number of different price points.
D) adding a fixed percentage to the cost of all items in a specific product class.
E) setting prices to achieve a profit that is a specified percentage of production costs.
129) Setting an annual target of a specific dollar volume of profit is referred to as
A) target profit pricing.
B) target return-on-investment pricing.
C) loss-leader pricing.
D) at-, above-, or below-market pricing.
E) yield management pricing.
130) A critical assumption when using target profit pricing is that
A) a higher average price will not cause the demand for a product to fall.
B) a higher average price will cause new competitors to join the industry.
C) a higher average price will be offset by reductions in manufacturing costs.
D) profit is tied to the current value of the dollar in relation to foreign currencies.
E) any price increase will be followed quickly by similar moves from all of your competitors.
131) A custom tailor wishes to use target profit pricing to establish a price for a custom-designed
business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is
$50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?
A) $520
B) $1,040
C) $1,880
D) $2,080
E) $10,000
132) Lady Marion Seafood, Inc., sells five-pound packages of Alaskan salmon. Assume that its
unit variable cost per package is $30 and its fixed cost is $250,000. It wants a target profit of
$38,000 based on a volume of 16,000 packages. What should the firm charge for a five-pound
package of salmon?
A) $25.00
B) $33.94
C) $40.00
D) $48.00
E) $61.25
133) Target return-on-sales pricing refers to
A) adjusting the price of a product so it is “in line” with that of its largest competitor.
B) setting the price of a line of products at a number of different price points.
C) adding a fixed percentage to the cost of all items in a specific product class.
D) setting prices to achieve a profit that is a specified percentage of the sales volume.
E) setting a price based on a specific annual dollar target profit volume.
134) Setting a price to achieve a profit that is a specified percentage of the sales volume is referred
to as
A) target return-on-investment pricing.
B) target return-on-sales pricing.
C) loss-leader pricing.
D) target pricing.
E) standard markup pricing.
135) What profit-oriented pricing method is often used because of the difficulty in establishing a
benchmark of sales or investment to show how much of a firm’s effort is needed to achieve the
target?
A) target return-on-investment pricing
B) target return-on-sales pricing
C) standard markup pricing
D) target profit pricing
E) loss-leader pricing
136) The owner of a store that sells custom kitchen cabinets wishes to use a target return-on-sales
pricing approach to establish a price for a typical section of cabinets. Assume that variable costs
total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent
return on sales at an annual volume of 400 cabinets. What price should be charged for a typical
cabinet section?
A) $263.50
B) $311.00
C) $387.50
D) $445.50
E) $775.00
137) Target return-on-investment pricing refers to
A) setting a price to achieve an annual target ROA.
B) adding a fixed percentage to the cost of all items in a specific product class.
C) setting prices to achieve a profit that is a specified percentage of the sales volume.
D) setting a price to achieve an annual target ROI.
E) setting a price based on an annual specific dollar target volume of profit.
138) Setting a price to achieve an annual target return-on-investment (ROI) is referred to as
A) target return-on-investment pricing.
B) target return-on-profit pricing.
C) target return-on-sales pricing.
D) target profit pricing.
E) customary pricing.
139) Which of the following companies would be most likely to use target return-on-investment
pricing?
A) a farmer
B) a supermarket chain
C) an engineering firm
D) a veterinarian
E) an automobile manufacturer
140) Target return-on-investment (ROI) is frequently used by
A) contractors.
B) public utilities.
C) business-to-business markets.
D) supermarkets.
E) small privately owned firms.
141) Which of the following is a competition-oriented approach to pricing?
A) skimming pricing
B) target pricing
C) customary pricing
D) target return-on-sales pricing
E) standard markup pricing
142) All of the following are competition-oriented approaches to selecting an approximate price
level except which?
A) loss-leader pricing
B) customary pricing
C) above-market pricing
D) odd-even pricing
E) at-market pricing
143) Rather than emphasize demand, cost, or profit factors, a price setter can stress what ________
doing.
A) the service sector is
B) the market or competitors are
C) the global economy is
D) suppliers are
E) the financial markets are
144) Customary pricing refers to
A) a pricing method where the price the seller quotes includes all transportation costs.
B) setting the same price for similar customers who buy the same product and quantities under the
same conditions.
C) deliberately selling a product below its list price to attract attention to it.
D) using a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors.
E) pricing based on what the market will bear.
145) Using a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors is referred to as
A) cost-plus pricing.
B) customary pricing.
C) standard markup pricing.
D) loss-leader pricing.
E) target profit pricing.
146) Southern gardeners normally pay $5 for a two-cubic-foot bag of pine bark mulch that they
buy at their local gardening-supply and home-improvement stores to keep the weeds down in their
gardens. If the price being charged by a retailer is not within a narrow range that gardeners feel is
appropriate, they will use substitutions—newspaper, grass clippings, or some other kind of
covering. When pricing pine bark mulch, a garden-supply or home-improvement retailer should
use
A) customary pricing.
B) at-market pricing.
C) loss-leader pricing.
D) penetration pricing.
E) bundle pricing.
147) Consumers buy water and soda from vending machines. Usually the price of each of these
products is about $1.50. If a marketer charges a significantly higher price for such products
dispensed by vending machines, such as $2.50 per item, sales are likely to decline. In order to
avoid declines in sales, marketers tend to be very consistent in the prices they charge for vending
machine products. This is an example of marketers employing a ________ strategy.
A) below-market pricing
B) skimming pricing
C) penetration pricing
D) loss-leader pricing
E) customary pricing
148) Setting a market price for a product or product class based on a subjective feel for the
competitors’ price or market price as the benchmark is referred to as
A) customary pricing.
B) above-, at-, or below-market pricing.
C) standard markup pricing.
D) competitive margin pricing.
E) experience curve pricing.
149) For most products, it is difficult to identify a specific market price for a product or product
class. Still, marketing managers often have a subjective feel for the competitors’ price or market
price. Using this benchmark, they then may deliberately choose a strategy of
A) above-, at-, or below-market pricing.
B) loss-leader pricing.
C) penetration pricing.
D) standard markup pricing.
E) experience curve pricing.
150) According to the textbook, clothing manufacturer Christian Dior and retailer Neiman Marcus
use ________ pricing.
A) above-market
B) at-market
C) below-market
D) prestige
E) everyday low
151) Swedish company Asko, which prides itself on manufacturing and marketing some of the
best-built and most prestigious appliances in the world, would probably use which
competition-oriented pricing approach?
A) customary pricing
B) above-market pricing
C) loss-leader pricing
D) target profit pricing
E) penetration pricing
152) According to the textbook, Revlon cosmetics uses ________ pricing.
A) above-market
B) at-market
C) below-market
D) prestige
E) everyday low
153) Manufacturers of private brands use which method of competition-oriented pricing?
A) penetration pricing
B) below-market pricing
C) loss-leader pricing
D) prestige pricing
E) skimming pricing
154) An ad campaign by Suave shampoo asked television viewers to identify the heads of hair of
women who used Suave shampoo and conditioner and those that used the much more expensive
salon hair-care products. The idea of the ad was that no one could tell which woman used the much
cheaper Suave brand. By making price its selling point, Suave is most likely using
A) customary pricing.
B) loss-leader pricing.
C) prestige pricing.
D) skimming pricing.
E) below-market pricing.
155) Companies use a ________ to assess whether its products and brands are above, at, or below
the market.
A) customary price
B) prestige price
C) price premium
D) price lining
E) cost benchmark