Exam 13: Pricing Concepts

Vandelay Industries manufactures a range of latex products. To set the price of its products, George, the CEO of Vandelay, calculates the total cost associated with the manufacturing of each product, then multiples that by 1.5 to get the sales price. Therefore, a product that cost $10 manufacture would sell for $15. Vandelay is using:

Maddie noticed that many students on campus had t-shirts and sweatshirts with Greek organization letters or club names on them. Recognizing that there was a huge market for this attire, Maddie rented a store front and a silk screening machine to get into the t-shirt business. Maddie's rent is $1,000 a month, including utilities. The silk screen machine leases for $300 a month. Maddie can buy blank t-shirts for $6 each and sweatshirts for $10 each. Maddie calculated the cost of materials for the silk screening at $2 per unit. If Maddie sells a screened t-shirt for $15 each, what is the contribution margin for t-shirts?

The breakeven model assumes per-unit variable costs do not change at different levels of operation. In reality, per-unit variable costs often go down as production quantities increase.

Mayra works at a jewelry store on the weekends. Roman, the store manager, asked her to help him with putting price tags on some new jewelry for display. Mayra was surprised that there was not much thought to the pricing process - all they did was look on the invoice for the price they paid, double that amount, and put that figure on the price tag. The jewelry store was using:

Parker Industries is a small company with a big name! Parker Industries is actually a one-person company that imports strands of LED lights from China and sells them through its website. Parker's only overhead is a storage unit for inventory that costs $125 a month and a $25 monthly fee for website hosting. Currently, Parker imports the lights for $.99 each (including inbound shipping) and sells them for $4.49. Parker also pays shipping expenses of $.50 per light strand. If Parker found a comparable storage for $100 a month, what would happen?

The amount of product that must be sold at a given price to generate sufficient revenue to cover total costs - both fixed and variable is the:

Parker Industries is a small company with a big name! Parker Industries is actually a one-person company that imports strands of LED lights from China and sells them through its website. Parker's only overhead is a storage unit for inventory that costs $125 a month and a $25 monthly fee for website hosting. Currently, Parker imports the lights for $.99 each (including inbound shipping) and sells them for $4.49. Parker also pays shipping expenses of $.50 per light strand. What is Parker's monthly breakeven volume?

Nakamichi introduced a set of true high-fidelity headphones at a price of $2,000. Most likely, Nakamichi was attempting to:

Customer demand is an important consideration in establishing prices. Demand, or at least potential demand, actually establishes the ___________ for a firm's prices.

In most economies, _______refers to the amount of funds required to purchase a product.

Krizia is excited about her bakery that she just started. In her bakery, rent, utilities, and salaries of non-production staff will all be elements of:

Azature introduced the "world's most expensive nail polish." The Black Diamond nail polish contains 267 carats of crushed black diamond powder and a price of a whopping $250,000 a bottle. Azature is using a(n) _______ approach.

A firm with $50,000 in fixed costs, selling price of $25 per unit, and variable costs of $5 a unit is currently operating at breakeven volume. If sales increase 100 units and costs remain the same, the firm will:

MycroFiber is a producer of microfiber material for the auto detailing industry. Jamal, the owner of MycroFiber is highly skilled in the technical and manufacturing areas, but does not understand pricing. Jamal knows he wants to cover the cost of production when selling his material and needs revenue to cover his overhead costs and to make a profit. To be sure he meets these goals, Jamal decides to take a cost-based pricing approach. If MycroFiber's cost of production is $4 a square yard, Jamal and Jamal prices his material at $10 a square yard, what is MycroFiber's margin percentage?

Firms expect each of their products to:

Walter White is a pharmaceutical distributor. Walter takes a cost-based approach to pricing his products by tripling his price for each of his products. For example, products that Walter imports from Mexico for $2, he sells for $6. What is Walter's margin percentage?

Jennifer is looking for a wedding present for her fiancé and is considering buying him a watch. She likes luxury items and is willing to spend between $4,000 and $10,000 on the gift. She visits several jewelry stores and realizes that the prices are the same for Rolex and Philippe Patek brand watches and each store tells her these brands are never discounted. What type of pricing objective is utilized by Rolex and Philippe Patek?

While both use a mathematical calculation, there is an important different between "markup" and "margin." Which of the following is correct?

Jamara has started a home party business that hosts parties and those attending paint signs. Jamara must pay $500 a year to be a representative for Paint A Sign. In addition, Jamara buys all the materials for the parties, including the metal base, the paints, brushes, stencils, and transfers. Currently, these items all add up to $10 on average. Jamara charges each participant $25 for each sign they make. For Jamara's Paint A Sign business, the $10 cost of materials is a:

Prestige pricing objectives emphasize: