The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard markup to the cost of the product. This approach to pricing is called ________.

36) The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard markup to the cost of the product. This approach to pricing is called ________.

A) value-based pricing

B) fixed cost pricing

C) cost-plus pricing

D) variable pricing

E) skimming pricing

Answer:  C

Diff: 1        Page Ref: 297

Skill:  Concept

Objective:  10-2

37) Lawyers, accountants, and other professionals typically price by adding a standard markup for profit. This is known as ________.

A) variable costs

B) cost-plus pricing

C) value-based pricing

D) break-even price

E) penetration pricing

Answer:  B

Diff: 2        Page Ref: 297

Skill:  Concept

Objective:  10-2

38) The simplest pricing method is ________.

A) value-based pricing

B) sealed-bid pricing

C) markup pricing

D) value-added pricing

E) target profit pricing

Answer:  C

Diff: 2        Page Ref: 297

Skill:  Concept

Objective:  10-2

39) Which of the following is a reason why markup pricing is NOT practical?

A) Sellers earn a fair return on their investment.

B) By tying the price to cost, sellers simplify pricing.

C) When all firms in the industry use this pricing method, prices tend to be similar.

D) This method ignores demand.

E) With a standard markup, consumers know when they are being overcharged.

Answer:  D

Diff: 3        Page Ref: 298

Skill:  Concept

Objective:  10-2

40) One reason ________ remains popular is that sellers are more certain about costs than about demand.

A) markup pricing

B) skimming pricing

C) inelasticity pricing

D) elasticity pricing

E) penetration pricing

Answer:  A

Diff: 2        Page Ref: 298

Skill:  Concept

Objective:  10-2

41) Price competition is minimized when all firms in an industry use which pricing method?

A) variable pricing

B) markup pricing

C) elasticity pricing

D) value-added pricing

E) value-based pricing

Answer:  B

Diff: 3        Page Ref: 298

Skill:  Concept

Objective:  10-2

42) Many people feel that ________ pricing is fairer to both buyers and sellers. Sellers earn a fair return on their investment but do not take advantage of buyers when buyers' demand becomes great.

A) skimming

B) markup

C) elasticity

D) inelasticity

E) penetration

Answer:  B

Diff: 2        Page Ref: 298

AACSB:  Ethical Understanding and Reasoning Abilities

Skill:  Concept

Objective:  10-2

43) Which of the following is a cost-based approach to pricing?

A) value-based pricing

B) going-rate pricing

C) target return pricing

D) good value pricing

E) A and C

Answer:  C

Diff: 2        Page Ref: 298

Skill:  Concept

Objective:  10-2

44) Break-even pricing, or a variation called ________, is when the firm tries to determine the price at which it will break even or make the profit it is seeking.

A) competition-based pricing

B) target return pricing

C) fixed cost pricing

D) value-based pricing

E) customer-based pricing

Answer:  B

Diff: 1        Page Ref: 298

Skill:  Concept

Objective:  10-2

45) Target return pricing uses the concept of a(n) ________, which shows the total cost and total revenue expected at different sales volume levels.

A) value-based chart

B) break-even chart

C) competition-based chart

D) demand curve

E) experience curve

Answer:  B

Diff: 2        Page Ref: 298

Skill:  Concept

Objective:  10-2

46) The break-even volume is the point at which ________.

A) the total revenue and total costs lines intersect

B) demand equals supply

C) the production of one more unit will not increase profit

D) the company can pay all of its long-term debt

E) a firm's profit goal is reached

Answer:  A

Diff: 3        Page Ref: 298

Skill:  Concept

Objective:  10-2

47) Which of the following statements about break-even analysis is true?

A) It is used to determine how much production experience a company must have to achieve desired efficiencies.

B) It is a technique used to calculate fixed costs.

C) It determines the amount of retained earnings a company will have during an accounting period.

D) It is a technique marketers use to examine the relationship between supply and demand.

E) It is calculated using variable costs, the unit price, and fixed costs.

Answer:  E

Diff: 3        Page Ref: 298

Skill:  Concept

Objective:  10-2

48) As a manufacturer increases price, the ________ drops.

A) target

B) break-even volume

C) cost-plus pricing

D) total cost

E) profit margin

Answer:  B

Diff: 3        Page Ref: 298

Skill:  Concept

Objective:  10-2

49) Which of the following involves setting prices based on competitors' strategies, costs, prices, and market offerings?

A) target return pricing

B) good-value pricing

C) added-value pricing

D) market-based pricing

E) competition-based pricing

Answer:  E

Diff: 1        Page Ref: 299

Skill:  Concept

Objective:  10-2

50) Which of the following is an external factor that affects pricing decisions?

A) the salaries of production management

B) demand

C) the salaries of finance management

D) funds expensed to clean production equipment

E) A, B, and C

Answer:  B

Diff: 2        Page Ref: 300

Skill:  Concept

Objective:  10-3