Marketing Final Flash Cards

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By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent.
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False (Unless otherwise stated, markup (percent) means percentage of selling price.)
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When customers have to pay the bill themselves, they are likely to be more price sensitive.
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True (People tend to be less price sensitive when someone else pays the bill or shares the cost.)
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Business customers are sometimes less price sensitive if there are switching costs.
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True (Customers are sometimes less price sensitive if there are switching costs.)
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Which of the following best illustrates “discrepancies of quantity”?
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Michelin made millions of tires last year—but most customers bought only one set. (Discrepancy of quantity means the difference between the quantity of products it is economical for a producer to make and the quantity final users or consumers normally want.)
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Traditional channels of distribution
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may involve little or no cooperation among channel members. (In traditional channel systems, the various channel members make little or no effort to cooperate with each other.)
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Which of the following describes WTB’s channel arrangements? (long question)
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Intensive distribution
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A good reason for developing or joining a vertical marketing system
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is that the whole channel focuses on the same target market at the end of the channel and seems to be more effective. (Vertical marketing systems are channel systems in which the whole channel focuses on the same target market at the end of the channel.)
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A disadvantage of direct-to-customer channels is that
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None of these is a disadvantage of direct-to-customer channels.
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National Tennis Ball’s channel arrangement: (long question)
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relies on exclusive distribution.
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Which of the following is true of direct distribution?
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It requires a significant investment in facilities. (Direct distribution usually requires a significant investment in facilities, people, and information technology.)
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Which of the following appears to best describe ATB’s channel arrangements? (long question)
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Selective distribution
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Which of the following statements about channel systems is true?
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Some administered channel systems obtain the advantages of vertically integrated systems while still retaining flexibility.
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Horizontal arrangements among competing retailers, wholesalers, or producers to limit sales by customer or territory have consistently been
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ruled illegal by the U.S. Supreme Court.
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An elite fashion manufacturer distributes apparel products in retail outlets worldwide. The company chooses to forego coordinating physical distribution functions with other firms in the distribution channel. Which of the following is most likely to occur as a result?
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Discord concerning issues of physical distribution
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Which of the following is an example of a JIT system shifting responsibility for PD activities backward in a distribution channel?
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A paint supplier is highly efficient at controlling logistics costs. Products are distributed at a high customer service level.
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Which of the following is true regarding JIT systems?
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JIT requires suppliers to respond to very short order lead times and the customer’s production schedule.
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Which of the following statements about the transporting function is TRUE?
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Transporting costs can be a large part of the total cost for heavy products that are low in value.
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A tire manufacturer currently produces tires in small quantities as they are ordered. The company learns that it can reduce costs significantly by producing one type of tire at a time in large quantities and storing its unsold tires for later sale. Should the company switch to large quantity production?
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Only if the economies of scale in production are greater than the additional inventory carrying cost.
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To help in managing excess inventory, United Tools would most likely use: (long question)
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a public warehouse.
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Department stores:
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All of these (Department stores have many separate departments, each like a separate limited-line store; they can handle a wide variety of shopping products with strong customer services; the number of department stores, the average sales per store, and their share of retail business have declined.)
question

Sebastian and Clere Franklin bought a tire recapping facility from a man who had decided to retire. They were going to convert the building to a studio for dance lessons—so they wanted to sell off the inventory of recapped tires and equipment for whatever they could get. The Franklins don’t know any buyers who might be interested in these products. Which of the following types of wholesalers would be most helpful?
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Brokers
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Which of the following is NOT a franchise operation?
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True Value Company
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Which of the following is a characteristic of agent wholesalers?
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They normally specialize by customer type and by product or product line.
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The U.S. Census Bureau defines wholesaling as being concerned with the activities of those persons or establishments that sell
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All are correct (Wholesaling is concerned with the activities of those persons or establishments that sell to retailers and other merchants, or to industrial, institutional, and commercial users, but that do not sell in large amounts to final consumers.)
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Department stores:
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have declined since the 1970s because of competition from well-run limited-line stores and mass-merchandisers.
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U.S. Census data show that:
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All of these alternatives are correct. (As per U.S. Census data, just over half of all the retail stores in the U.S. had annual sales of less than $1 million. Less than 15 percent of the retailers had annual sales over $5 million. There are over 1 million retailers and only 330,000 manufacturers and 435,000 wholesalers.)
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A wholesaler that carries only health foods instead of a full line of groceries is a
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specialty wholesaler.
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The “wheel of retailing” theory says that:
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new types of retailers enter as low-status, low-margin, low-price operators and eventually offer more services and charge higher prices.
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The development of new types of retailers can be best explained by applying:
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target marketing and product life cycle concepts.
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Franchise operations provide a good example of:
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contractual vertical marketing systems.
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Regarding wholesalers, which of the following descriptions is TRUE?
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SELLING AGENT: does not own the products, does the whole marketing job nationally, and may handle competing lines.
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Regarding wholesalers, which of the following types has the LOWEST costs as a percent of sales?
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Agent wholesalers
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Which of the following statements about agent wholesalers is FALSE?
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They usually provide a larger number of functions than limited-function wholesalers.
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Producers who know something about their target customers’ needs and attitudes often supply their relatively untrained salespeople with a sales presentation in which (1) the salesperson does most of the talking at the beginning, (2) then brings the customer into the discussion to clarify the customer’s needs, and (3) tries to close the sale. They are using a:
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selling formula approach.
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Retail order getters are usually required for:
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unsought products.
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Jan Alvarez works for a cable TV company in a large city. She makes telephone calls during the early evening and tries to sell cable services to nonsubscribers. Jan is
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an order getter.
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Wilson Alvaro’s sales position involves: (long question)
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All of these are included in Wilson’s sales position. (Wilson’s sales position involves providing team selling, major account management, and also providing customer service.)
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Which salesperson’s main sales task is supporting? (long question)
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Melissa Tran
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Which of the following is likely to have the lowest total personal selling expenses?
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A company with straight commission salespeople and low sales volume
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What sales presentation approach does Charlie Riggs use? (long question)
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prepared sales presentation.
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Which salesperson has a job where compensation is likely to be straight salary? (long question)
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Emily Winters
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The total personal selling expense of a business is likely to be most stable under which of the following scenarios?
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All of the company’s salespeople receive straight salary compensation.
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Which of the following is true about Melissa Tran’s sales position? (long question)
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It involves missionary sales.
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In the U.S., about ________ people work directly in the advertising industry.
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460,000 (In the United States, about 462,000 people work directly in the advertising industry.)
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Which advertising agency “supergroup” had the largest revenue (almost $14 billion) in 2009?
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WPP Group
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If the promotion objective is to get attention and hold interest, which type of publicity would work best?
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Articles in the press
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In the U.S., about ________ people work in advertising agencies.
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230,000 (In the United States, about 462,000 people work directly in the advertising industry. Advertising agencies employ only about half of all these people.)
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Ad spending for television in the U.S. in 2010 was about:
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$50 billion. (Ad spending for television and cable in the U.S. in 2010 was about $50 billion. Refer to Exhibit 15-5.)
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Which of the following is most likely to spend 2.5 percent on advertising as a percentage of sales?
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A producer of motor vehicles
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In 2010, about _______ percent of ad spending in the U.S. was for Internet advertising.
answer

12
question

In the U.S., producers of games and toys spend about _____ percent of their sales dollars on advertising.
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10
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In the U.S., producers of sporting and athletic goods spend about _____ percent of their sales dollars on advertising.
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9
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Ad spending for magazines in the U.S. in 2010 was about:
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$17 billion.
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Which of the following observations is true?
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Market share objectives and straight sales growth objectives have similar limitations.
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Over time, a skimming policy usually involves
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price movement down the demand curve.
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Some top managers seek only enough profits to convince stockholders that they are “doing a good job.” The pricing objective of such managers is:
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satisfactory profits.
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Cash discount terms of 2/10, net 30 on an invoice would—in effect—amount to borrowing at an annual interest rate of about ________ percent if the buyer did not pay the invoice for 30 days.
answer

36
question

A target return figure of zero implies:
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setting a price level that will just recover costs.
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Some marketing managers have set up relationships with Internet companies whose ads invite customers to “set your own price.” Such marketing managers
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are carefully administering a flexible price.
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Seeking a profit maximization pricing objective:
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All of these alternatives are correct. (A profit maximization objective seeks to earn “all the traffic will bear.” If there are no competitors and the demand curve is inelastic, then profit maximization leads to high prices in the short run. But pricing to achieve profit maximization doesn’t always lead to high prices. If the whole demand curve is fairly elastic, then penetration pricing may be )
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Regarding pricing objectives, a good marketing manager knows that:
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status quo pricing objectives can be part of an extremely aggressive marketing strategy.
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Pricing objectives should be explicitly stated because:
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they have a direct effect on pricing policies as well as price setting methods.
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Careful handling of “trade-ins”—to avoid reducing the list price—is especially important for sellers of:
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None of these is a good answer.
question

Jackson Motors, Inc. normally sells its electric motors to all buyers for $100. However, a competitor offered to sell similar motors to one of Jackson Motors’ biggest customers for only $80 and Jackson Motors offered that customer—but not its other customers—a $80 selling price. According to the Robinson-Patman Act:
answer

Jackson Motors has not violated the law—it is just meeting competition.
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Caught between the threat of antitrust action, stockholder demands, and public interest groups, some large corporations set a(an) ______________ pricing objective.
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satisfactory long-run target return
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When rice producers from China sold rice for a lower price in Japan as compared to the price charged in China, it appeared the Chinese rice producers were engaging in _____.
answer

dumping
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The sales analysis of a product revealed that profits were highest when it was initially introduced into the market with a high selling price. However, the price was gradually reduced as it started facing competition as substitutes entered the market. This is an example of a(n) _____.
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skimming price policy
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According to the text,
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managers should administer their prices.
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A profit maximization pricing objective
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does not always lead to high prices.
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A firm would likely pursue penetration pricing when
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the whole demand curve is fairly elastic.
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An instant noodles brand, upon the release of its product, attracted customers by offering a 50 percent discount on the purchase of two family packs. Once the brand had gained attention, this discount was removed and the product was priced similar to the competing brands in the market. This pricing strategy is an example of _____.
answer

introductory price dealing
question

Jake’s Auto Repair receives an invoice for some equipment he purchased on credit. The full face value of the invoice is to be paid within 60 days. However, if it is paid within 10 days, Jake can take a 6 percent discount off the face value of the invoice. Which of the following notations accurately represents the conditions described above?
answer

6/10, net 60
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If one of Bella Computers’ retail customers did not pay the invoice for 30 days, the customer would-in effect-be borrowing at what annual interest rate?
answer

36 percent
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The quarterly operating statement for a firm gives the following information: Number of pieces manufactured: 100 Number of pieces sold: 100 Total cost of goods sold: $800 Average cost of single piece: $5 Net sales: $1,000 It can be inferred that the firm’s gross margin is _____.
answer

$200
question

Walgreens Drugstores buys a bottle of shampoo from a wholesaler for $3.25 and then places it on a shelf with a price tag of $4.64. What is Walgreens’ markup on selling price (expressed as a percent)?
answer

30 percent
question

Michael Soles—owner of Soles Shoe Store—recently discovered that shoe stores in his trading area have an average markup of 40 percent. Upon investigation, Michael found that his average markup is $15 on shoes that he sells for $45. This suggests that:
answer

Michael is taking a smaller average markup than his competitors.
question

High Meadow Mfg. Co. sold its product through wholesalers and retailers—allowing the wholesalers a markup of 25 percent and retailers a markup of 40 percent. If the retail selling price is $100 and the manufacturer’s cost is $30, what markup in dollars did High Meadow receive on the sale of this product?
answer

$15.00
question

TopKnotch Mfg. Co. has a production cost of $280. It sells its product to a wholesaler for $400. The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000. Which of the following is true about this “markup chain?”
answer

The manufacturer is taking a markup of 30 percent.
question

A producer makes an item for $32 and sells it with a 50 percent markup to a wholesaler. The wholesaler then applies a 20 percent markup. A retailer then uses a 60 percent markup. The final retail selling price is:
answer

$200.00.
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A low stockturn rate
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ties up working capital.
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As output increases, average cost decreases continually because
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average fixed cost per unit is decreasing.
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The total fixed costs are $10,000, and the average variable cost per unit is $3. For a production volume of 10,000 units, the average cost per unit is
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$4.00 (Average cost (per unit) is obtained by dividing total cost by the related quantity.)
question

A firm that is using marginal analysis to set prices finds that setting a price of $180 per unit would result in the sale of 6 units. The total variable cost of production is equal to $300 and total fixed cost is equal to $150. In this case, the firm’s total revenue will be _____.
answer

$1,080
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A firm in monopolistic competition with a down-sloping demand curve:
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can use marginal analysis to help it maximize profits.
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Customers tend to be more price sensitive
answer

the greater the total expenditure.
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Customers are likely to be less price sensitive
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the greater the significance of the end benefit.
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Which of the following observations concerning a “reference price” is true?
answer

Demand may increase if a firm’s price is lower than a customer’s reference price.
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Which of the following prices is most likely to be seen if a firm is using odd-even pricing?
answer

$99.95 (Odd-even pricing is setting prices that end in certain numbers.)
question

Which of the following observations is false?
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Negotiated pricing is rare in situations where the marketing mix is adjusted for each customer.
question

What is the final selling price Sports Depot charges for a SPI basketball? (long question)
answer

$21.50
question

Marketing cost analysis is often not given enough importance because:
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accountants show little interest in their firm’s marketing process.
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When the “full-cost approach” to marketing cost analysis is used, allocating fixed costs on the basis of sales:
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may make low-volume customers appear more profitable than they are.
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The ____ approach shows operating managers and salespeople what they’ve actually contributed to covering general overhead and profit.
answer

contribution margin
question

A firm generates a monthly profit of $160,000 dollars. If the 80/20 rule applies to this firm’s products, which of the following statement is true?
answer

The firm generates $128,000 in profit from 20% of its products.
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Which of the following observations is true?
answer

The contribution-margin approach ignores some costs to get results
question

Premier Bank considers population an effective measure of sales potential for its safe deposit boxes. It has broken down the population of the U.S. by region and assigned 30 percent of the total population to the Northeastern region. If Premier has a planned sales goal of $2.5 million nationwide, and actual sales in the Northeastern region last year were $650,000, what was the Northeastern region’s performance index (to the nearest whole number percent)?
answer

87 percent
question

Which of the following would be the BEST reason to use the “full-cost approach” when comparing the performance of several product managers?
answer

It makes each manager bear a share of the overhead expenses which were made for everyone’s benefit.
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Department A in a company had sales of $60,000 in the year 2012. Variables costs of sales was $30,000 and variable selling expenses were $9,000. Fixed administrative expenses were $5000. What is the contribution margin?
answer

$21,000
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A good reason for using performance indexes is to:
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make it easier to compare situations.
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Which of the following observations concerning the full-cost approach is NOT TRUE?
answer

All costs are not allocated in all situations. (In the full-cost approach, all costs are allocated to products, customers, or other categories. Even fixed costs and common costs are allocated in some way.)

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