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Chapter-by-chapter aids: Chapter 18
units produced and sold during that period. The firm's invoices read "F.O.B.--Delivered" and "1/10, net
30." Customers are allowed to deduct 3 percent from the face value of the invoice for buying plates in
carload quantities, and another 2 percent for advertising them locally.
The custom products are sold "F.O.B. mill"--with CPI offering a price for each job. Competition is strong
from many other manufacturers, who are able to offer similar products meeting the customers'
CPI forecasts that sales will increase to $250 million by 2012. However, much of this growth is tied to
picnic plates--a market in which the firm has about a 7 percent market share and faces aggressive price
competition from many smaller firms with greater brand familiarity. Further, CPI has been late with more
than 50 percent of its plate orders due to scheduling conflicts with orders for custom products.
B-1. CPI's product line includes:
A) only convenience products.
B) impulse products and natural products.
C) specialty products and supplies.
D) shopping products and raw materials.
E) staple products and component parts.
Answer: E
AACSB: Reflective Thinking
Level of Difficulty: 2 Medium
Learning Objective: 8.7
Blooms: Apply
Feedback: Staples are products that bought routinely, without much thought. Component parts are
finished (or nearly finished) items that are ready for assembly into the final product. Refer to Chapter 8.
B-2. CPI's picnic plates seem to be in the ______________ stage of the product life cycle.
A) market maturity
B) market growth
C) market introduction
D) sales decline
Answer: A
AACSB: Reflective Thinking
Level of Difficulty: 2 Medium
Learning Objective: 9.1
Blooms: Apply
Feedback: The market maturity stage occurs when industry sales level off and competition gets tougher.
Refer to Chapter 9.
B-3. For the picnic plates, CPI seems to be facing:
A) monopolistic competition approaching pure competition.
B) a pure monopoly situation.
C) pure competition.
D) monopolistic competition approaching pure monopoly.
E) an oligopoly situation.
Answer: A
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 3.4, Appendix A.5
Blooms: Apply
Feedback: In monopolistic competition, a number of different firms offer marketing mixes that at least
some customers see as different. Most product-markets head toward pure competition, where
Part IV
IV-18-12 Perreault, Cannon, & McCarthy
prices and profit margins shrink. Refer to Chapter 3 and Appendix A.
B-4. CPI uses:
A) a direct-to-customer channel system for all its products.
B) dual distribution.
C) an indirect channel system for all its products.
D) a direct-to-customer channel system for the plates and an indirect channel system for the custom
products.
E) an indirect channel system for the plates and a direct-to-customer channel system for the custom
products.
Answer: E
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 10.2
Blooms: Apply
Feedback: Some producers handle the whole distribution job themselves—direct-to-customer, or use
wholesalers, retailers, and other specialists—indirect selling. Refer to Chapter 10.
B-5. The "sales reps" who sell CPI's plates are:
A) manufacturers' agents.
B) limited-function wholesalers.
C) the firm's own order takers.
D) selling agents.
E) merchant wholesalers.
Answer: A
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 12.7
Blooms: Apply
Feedback: A manufacturers’ agent sells similar products for several noncompeting producers—earning a
commission on what is actually sold. Refer to Chapter 12.
B-6. For its plates, CPI uses ______________ pricing.
A) flexible
B) demand-oriented
C) target return
D) average-cost
E) penetration
Answer: D
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 17.3
Blooms: Apply
Feedback: Average-cost pricing means adding a reasonable markup to the average cost of a product.
Refer to Chapter 17.
B-7. CPI offers the grocery wholesalers and retail chains:
A) cumulative quantity discounts.
B) cash discounts for paying their bills quickly.
C) P.M.'s
D) advertising allowances.
E) all of these alternatives are correct.
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter-by-chapter aids: Chapter 18
Instructor's Manual to Accompany Essentials of Marketing IV-18-13
Answer: E
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 16.4
Blooms: Apply
Feedback: Cumulative quantity discounts apply to purchases over a given period and the discount usually
increases as the amount purchased increases. Cash discounts are reductions in price to encourage
B-8. Regarding shipping costs in the CPI case:
A) CPI pays the shipping costs for the plates, while its customers pay the shipping costs for the custom
products.
B) CPI uses freight-absorption pricing.
C) all of CPI's customers take title to the products at the point of loading and pay all shipping costs
themselves.
D) CPI pays the shipping costs for all its customers--keeping title to the products until delivery.
E) CPI uses zone pricing.
Answer: A
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 16.4
Blooms: Apply
Feedback: If a firm wants to pay the freight for the convenience of customers, it uses F.O.B. delivered.
This is how CPI ships the plates. F.O.B. mill means that the seller pays the cost of loading the products
B-9. For the custom products, CPI uses ______________ pricing.
A) demand-backward
B) penetration
C) average-cost
D) target-return
E) bid
Answer: E
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 17.8
Blooms: Apply
Feedback: Bid pricing means offering a specific price for each possible job rather than setting a price that
applies for all customers. Refer to Chapter 17.
B-10. CPI's sales forecasts for picnic plates are not likely to be achieved unless the firm can improve its:
A) pioneering advertising.
B) paper coating machines.
C) below-average product quality.
D) customer service level.
E) above-the-market prices.
Answer: D
AACSB: Analytic
Level of Difficulty: 2 Medium
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Part IV
IV-18-14 Perreault, Cannon, & McCarthy
Learning Objective: 11.2
Blooms: Apply
Feedback: Customer service level is how rapidly and dependably a firm can deliver what customers want.
Refer to Chapter 11.
C. Sure Foot, Ltd.
Use the following information to answer the questions that refer to the Sure Foot case.
Sure Foot, Ltd. produces high-quality shoes and boots for serious hikers.Sure Foot's shoes have
suggested retail prices ranging from just under $40 to about $150. Usually, the retailer buys the shoes for
about 50 percent less than the list price, and the retailer pays the freight charges from Sure Foot's plant in
Maine. Sure Foot's credit terms are 2/10, net 30. Although Sure Foot's brand appears on every shoe--the
firm does very little mass selling, except for a limited program of cooperative advertising and some sales
promotion at walking events.
Sure Foot's shoes are carried by "better" sporting goods stores all across the nation--although usually in
fairly small quantities. Its main showroom is in Boston, where two salaried salespeople handle most of the
The walking shoe market is supplied by 7 large firms and 50 or more smaller firms. While these firms are
competitive, they do vary their materials, styles, prices, and promotion. The "high-quality" market is
supplied by only 5 firms--Sure Foot being the largest. While these firms are also competitive, they
generally offer a more limited assortment of materials, styles, and prices because the "high-quality" part of
the market is not as large--and does not appear to be growing.
C-1. How are Sure Foot's shoes seen by most of its target market?
A) Impulse products
B) Staple products
C) Heterogeneous shopping products
D) Homogeneous shopping products
E) Specialty products
Answer: C
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 8.6
Blooms: Apply
Feedback: Heterogeneous shopping products are shopping products the customer sees as different and
wants to inspect for quality and suitability. Refer to Chapter 8.
C-2. Assuming that Sure Foot wants to be in only the "better" stores--and mainly in large metropolitan
areas--it seems to be seeking:
A) selective distribution.
B) exclusive distribution.
C) intensive distribution.
Answer: A
AACSB: Reflective Thinking
Level of Difficulty: 2 Medium
Learning Objective: 10.6
Blooms: Apply
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter-by-chapter aids: Chapter 18
Instructor's Manual to Accompany Essentials of Marketing IV-18-15
Feedback: Selective distribution is selling through only those intermediaries who will give the product
special attention. Only the better intermediaries are used here. Refer to Chapter 10.
C-3. Sure Foot's "field reps" are:
A) selling agents.
B) missionary salespeople.
C) brokers.
D) manufacturers' agents.
E) merchant wholesalers.
Answer: D
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 12.7
Blooms: Apply
Feedback: A manufacturers’ agent sells similar products for several noncompeting producers—for a
commission on what is actually sold. Refer to Chapter 12.
C-4. In the Sure Foot case, the nature of competition in the hiking shoe market is:
A) monopolistic competition
B) monopoly
C) oligopoly
D) pure competition
E) None of these is a good answer.
Answer: A
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 3.4, Appendix A.5
Blooms: Apply
Feedback: In monopolistic competition, a number of different firms offer marketing mixes that at least
some customers see as different. Each competitor tries to get control (a monopoly) in its “own” target
market. Refer to Chapter 3 and Appendix A.
C-5. Sure Foot's geographic terms are probably:
A) F.O.B. freight allowed.
B) F.O.B. buyer's factory.
C) F.O.B. shipping point.
D) F.O.B. delivered.
E) None of these--Sure Foot uses zone pricing.
Answer: C
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 16.4
Blooms: Apply
Feedback: F.O.B. shipping point means that the seller (Sure Foot) pays the cost of leading the products
onto some vehicle; then title to the products passes to the buyer (retailer). The buyer pays the freight and
takes responsibility for any damage in transit. F.O.B. shipping point simplifies the seller’s pricing but it
C-6. "Credit terms" of 2/10, net 30 mean that Sure Foot is offering customers a:
A) functional discount.
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Part IV
IV-18-16 Perreault, Cannon, & McCarthy
B) quantity discount.
C) seasonal discount.
D) cash discount.
E) cooperative advertising allowance.
Answer: D
AACSB: Reflective Thinking
Level of Difficulty: 2 Medium
Learning Objective: 16.4
Blooms: Apply
Feedback: Cash discounts are reductions in price to encourage buyers to pay their bills quickly. 2/10, net
30 means the buyer can take a 2 percent discount off the face value of the invoice if the invoice is paid
C-7. Sure Foot is probably in what stage of the product life cycle in the "high quality" market?
A) Market maturity
B) Market growth
C) Market introduction
D) Sales decline
Answer: A
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 9.1
Blooms: Apply
Feedback: The market maturity stage occurs when industry sales level off and competition gets tougher.
Refer to Chapter 9.
D. Electech, Inc.
Use this information to answer the following questions that refer to the EI (Electech Inc.) case.
Electech, Inc. (EI) produces a line of semiconductors for electronics products manufacturers. These items
range in price from $5-$100 and are components of products the buyers are producing. EI also designs
and builds computer networking equipment. The prices of these items range from $5,000 to $100,000.
These are used to control production equipment. Usually, they are custom-made to the specifications of
the buyer--the firm that will use the product in its own production process.
EI sells nationally through independent sales reps--paid on commission--who work in large industrial
centers across the country. EI is more concerned with the quality of these reps than with the number of
The home office salespeople are "technical specialists" who sell almost all the networking equipment,
while the "reps" mostly sell the semiconductors. Sometimes, however, the reps will send in leads for
customers who want networking equipment. EI also sells some of its semiconductors through a Los
Angeles wholesaler who carries stock for West Coast customers.
There are many producers and importers of semiconductors in the U.S.--but several firms have captured
large shares of the networking equipment market. EI has held its own, and in fact, over the past five
Industry-wide, prices of the more or less homogeneous semiconductors have been forced further and
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter-by-chapter aids: Chapter 18
Instructor's Manual to Accompany Essentials of Marketing IV-18-17
further down over the last seven years--as have industry profits. The price of networking equipment is set
by adding a standard markup percent to the direct cost of the items--for overhead and for profit. Following
EI publishes a catalog that is revised periodically. And it exhibits in most equipment trade shows.
D-1. What kind of products are EI's semiconductors FOR MOST CUSTOMERS?
A) Supplies
B) Installations
C) Component parts
D) Accessory equipment
E) Raw materials
Answer: C
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 8.7
Blooms: Apply
Feedback: Component parts are finished (or nearly finished) items that are ready for assembly into the
final product. Refer to Chapter 8.
D-2. What kind of products are EI's networking equipment?
A) Component parts
B) Accessory equipment
C) Installations
D) Raw materials
E) Supplies
Answer: B
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 8.7
Blooms: Apply
Feedback: Accessories are short-lived capital items, tools, and equipment used in production or office
activities. Refer to Chapter 8.
D-3. EI's independent sales reps are:
A) selling agents.
B) rack jobbers.
C) specialty wholesalers.
D) manufacturers' agents.
E) desk jobbers.
Answer: D
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 12.7
Blooms: Apply
Feedback: A manufacturers’ agent sells similar products for several noncompeting producers—for a
commission on what is actually sold. Refer to Chapter 12.
D-4. What kind of distribution is EI seeking for its networking equipment?
A) Direct distribution
B) Exclusive distribution
C) Selective distribution
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Part IV
IV-18-18 Perreault, Cannon, & McCarthy
D) Intensive distribution
Answer: A
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 10.6
Blooms: Apply
Feedback: Many firms prefer to distribute directly to the final customer or consumer to serve them better.
Refer to Chapter 10.
D-5. In the EI case, what is the nature of competition for networking equipment?
A) Monopoly
B) Monopolistic competition
C) Pure competition
D) Oligopoly
Answer: B
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 3.4, Appendix A.5
Blooms: Apply
Feedback: In monopolistic competition, a number of different firms offer marketing mixes that at least
some customers see as different. Each competitor tries to get control (a monopoly) in its “own” target
D-6. What promotion method is EI using when it publishes catalogs, and exhibits in trade shows?
A) Sales promotion
B) Publicity
C) Advertising
D) Personal Selling
Answer: A
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 15.9
Blooms: Apply
Feedback: Sales promotion refers to those promotion activities—other than advertising, publicity, and
personal selling, that stimulate interest, trial, or purchase by final customers or others in the channel.
D-7. EI's geographic terms are probably:
A) F.O.B. delivered.
B) F.O.B. buyer's factory.
C) F.O.B. freight allowed.
D) F.O.B. mill.
E) F.O.B. basing point.
Answer: D
AACSB: Analytic
Level of Difficulty: 2 Medium
Learning Objective: 16.4
Blooms: Apply
Feedback: F.O.B. mill means that the seller pays the cost of loading the products onto some vehicle; then
title to the products passes to the buyer. The buyer pays the freight and takes responsibility for damage in
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
