Question 1

The ________ is the difference between the retail price and the cost of an item.

Accepted Answer

A)  markup 
B)  markdown 
C)  break-even point 
D)  variable cost 
E)  fixed cost

Question 2

Describe geofencing.

Accepted Answer

The answer of Describe geofencing....

Question 3

Predatory pricing arises when a dominant retailer sets prices below its costs to drive competitive retailers out of business.

Accepted Answer

A) True 
 B)False

Question 4

A(n) ________ strategy emphasizes the continuity of retail prices at a level somewhere between the regular nonsale price and the deep-discount sale price of high/low retailers.

Accepted Answer

A)  leader pricing 
B)  keystoning 
C)  high/low pricing 
D)  price skimming 
E)  everyday low-pricing

Question 5

What is value?

Accepted Answer

A)  It refers to inexpensive merchandise. 
B)  It is the relationship between what consumers have and what they want. 
C)  It is the relationship between desires and needs. 
D)  It is the relationship between what consumers receive and what they have to pay for it. 
E)  It refers to the lowest price and the lowest quality merchandise or service.

Question 6

Which of the following statements holds True for an everyday low-pricing (EDLP) strategy?

Accepted Answer

A)  Slow-selling merchandise can be sold by discounting the price. 
B)  It allows retailers to charge higher prices to customers who are not price sensitive. 
C)  Customers need to wait for items to go on sale. 
D)  The use of EDLP increases the need for advertising. 
E)  EDLP retailers do not have to incur the labor costs of changing price tags.

Question 7

What are the limits of the rule-based approach of taking markdowns?

Accepted Answer

The answer of What are the limits of the rule-based...

Question 8

A drugstore purchases hand cream at $2 per jar and sells the jars for $15. What is the markup percentage?

Accepted Answer

A)  60% 
B)  87% 
C)  40% 
D)  5% 
E)  22%

Question 9

Which of the following statements describes a situation in which markdowns would not be appropriate?

Accepted Answer

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.

Question 10

Smith's Electronics originally priced a private-label portable DVD player at $90, and then sold 1,500 units per week. After raising the price to $100, sales dropped to 1,000 units per week. First, determine the price elasticity, and then determine the profit-maximizing price if the private-label portable DVD player costs $50.

Accepted Answer

A)  $90 
B)  $85.70 
C)  $75 
D)  $70.25 
E)  $70

Question 11

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?

Accepted Answer

A)  33,000 pies 
B)  16,000 pies 
C)  8,500 pies 
D)  21,333 pies 
E)  12,645 pies

Question 12

Frankie is a buyer for a department store and is buying some handbags at a cost of $30 from a vendor. He desires to have a 60 percent markup to meet the financial goals of this category. What will be the retail price of these handbags?

Accepted Answer

A)  $75 
B)  $40 
C)  $50 
D)  $60 
E)  $95

Question 13

Initial markup is the actual sales realized for the merchandise minus its costs.

Accepted Answer

A) True 
 B)False

Question 14

What are five factors retailers consider in setting retail prices?

Accepted Answer

The answer of What are five factors retailers consider in...

Question 15

When making a good markdown decision, a retailer should

Accepted Answer

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.

Question 16

When pricing products, retailers must

Accepted Answer

A)  consider the company's overall strategy when choosing a pricing policy. 
B)  observe the competition to offer the same price by price fixing. 
C)  reduce stockouts by keeping prices higher than the competition. 
D)  risk supply chain mishaps by keeping process low. 
E)  price consistently throughout the chain.

Question 17

How does optimization software help retailers in taking markdowns?

Accepted Answer

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.

Question 18

Vertical price fixing involves agreements between competing retailers to illegally set the same prices.

Accepted Answer

A) True 
 B)False

Question 19

Because of markdowns, discounts to employees and customers, and merchandise reductions,

Accepted Answer

A)  the actual selling price is lower than the initial sales price. 
B)  the maintained markup is always less than the gross margin. 
C)  the total revenue becomes equal to the total cost. 
D)  the value of average inventory at cost is less than its receipt value. 
E)  the initial markup is always lower than the maintained markup.

Question 20

________ is an analytical tool that enables retailers to know the number of units they need to sell to begin making a profit.

Accepted Answer

A)  Yield management 
B)  Break-even analysis 
C)  Keystoning 
D)  Price lining 
E)  Cost-plus pricing

Exam 13: Retail Pricing

The ________ is the difference between the retail price and the cost of an item.

Describe geofencing.

Predatory pricing arises when a dominant retailer sets prices below its costs to drive competitive retailers out of business.

A(n) ________ strategy emphasizes the continuity of retail prices at a level somewhere between the regular nonsale price and the deep-discount sale price of high/low retailers.

What is value?

Which of the following statements holds True for an everyday low-pricing (EDLP) strategy?

What are the limits of the rule-based approach of taking markdowns?

A drugstore purchases hand cream at $2 per jar and sells the jars for $15. What is the markup percentage?

Which of the following statements describes a situation in which markdowns would not be appropriate?

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?

Frankie is a buyer for a department store and is buying some handbags at a cost of $30 from a vendor. He desires to have a 60 percent markup to meet the financial goals of this category. What will be the retail price of these handbags?

Initial markup is the actual sales realized for the merchandise minus its costs.

What are five factors retailers consider in setting retail prices?

When making a good markdown decision, a retailer should

When pricing products, retailers must

How does optimization software help retailers in taking markdowns?

Vertical price fixing involves agreements between competing retailers to illegally set the same prices.

Because of markdowns, discounts to employees and customers, and merchandise reductions,

________ is an analytical tool that enables retailers to know the number of units they need to sell to begin making a profit.