Exam 13: Pricing Concepts

Mitch and Jill were visiting the Eiffel Tower when there was a downpour. They were willing to pay 25 euros for a poorly made umbrella that would usually sell for 10 euros or less. This illustrates the fact that:

Fixed costs typically include items such as:

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 variable cost?

A company will never sell a product below the production costs.

A firm with $50,000 in fixed costs, selling price of $25 per unit, and variable costs of $5 a unit has a breakeven volume of:

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 variable cost. This cost per unit will never change.

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 markup percentage?

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. Therefore, an item that they paid $125 was priced at $250. The jewelry store's margin percentage on that item when sold would be:

Prestige pricing is a common approach for fast food restaurants.

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 is currently selling 50 units a month, what is Parker's monthly profit or loss?

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 is currently selling 300 units a month, what is Parker's monthly profit or loss?

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 calculate the cost of production and add a percentage to that. Jamal is using:

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's markup percentage is:

The pricing technique used to determine the number of products that must be sold at a specified price to generate enough revenue to cover total cost is known as _____ analysis.

You know a cost is a fixed cost if that expense remains the same regardless of sales volume (such as the number of customers served or the units produced).

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. Considering only the figures presented above, what is the variable cost for a t-shirt Maddie silk screens?

Which of the following is a limitation of breakeven analysis?

A cost that remains stable at any production level within a certain range is called a(n) _____ cost.

Analysis has shown that ingredients account for less than 5 percent of a perfume's cost. So if a perfume costs $135 or more per ounce, it reflects the marketer's adoption of a pricing objective that focuses on:

Several factors influence the best price. In particular three core issues influence the correct price. Which of the following is NOT one of the three foundations of pricing?