# MKTG 3700 Marketing Metrics Quiz 3

Project M has a 10 year life span and you, as the consultant, are looking at its Excel worksheet and feel quite comfortable with “the Cumulative Discounted Net Cash Flow over the life of the project.” In other words, the _____ is looking good.

a. Cost of Capital

b. Internal Rate of Return

c. Payback Period

d. Discount Rate

e. Net Present Value

a. Cost of Capital

b. Internal Rate of Return

c. Payback Period

d. Discount Rate

e. Net Present Value

e. Net Present Value

Coupon promotions for consumer non-durable products, such as ready-to-eat packaged foods, are often money losing propositions. That is, the revenue from the promotions does not cover their costs. Still, they are quite popular, probably because…

a. They are easy to implement

b. They bring good publicity to the company

c. They often bring lots of new customers who then do significant repeat buying

d. Advertising has lost its effectiveness

e. Coupon promotions are fun to implement

a. They are easy to implement

b. They bring good publicity to the company

c. They often bring lots of new customers who then do significant repeat buying

d. Advertising has lost its effectiveness

e. Coupon promotions are fun to implement

c. They often bring lots of new customers who then do significant repeat buying

Fixed Costs are NOT usually thought of or estimated on a per unit basis. Which of the following situations is the exception?

a. Calculation of Breakeven units.

b. Calculation of Breakeven dollars

c. Figuring out and setting the Unit Selling Price for a product.

d. Calculation of Required Level Sales Units for a Profit.

e. Calculation of Required Level Sales Dollars for a Profit.

a. Calculation of Breakeven units.

b. Calculation of Breakeven dollars

c. Figuring out and setting the Unit Selling Price for a product.

d. Calculation of Required Level Sales Units for a Profit.

e. Calculation of Required Level Sales Dollars for a Profit.

c. Figuring out and setting the Unit Selling Price for a product.

Demand for products like a Caribbean cruise is generally considered price-elastic. This means….

a. Total revenue increases when price is decreased

b. Quantity demanded increases when price is increased

c. Quantity demanded decreases when price is decreased

d. Total revenue decreases when price is increased

e. choices a and d above are both correct

a. Total revenue increases when price is decreased

b. Quantity demanded increases when price is increased

c. Quantity demanded decreases when price is decreased

d. Total revenue decreases when price is increased

e. choices a and d above are both correct

e. choices a and d above are both correct

MM Inc. plans to go direct to 5,000 US retailers spread out all over the country, bypassing their 15 wholesalers. It would be reasonable for them to expect changes in…..

a. Average value of inventory, valued using CoGS

b. The cost of carrying average inventory, valued using CoGS

c. Average value of accounts receivable

d. The cost of carrying average accounts receivable

e. all of (a-d) above.

a. Average value of inventory, valued using CoGS

b. The cost of carrying average inventory, valued using CoGS

c. Average value of accounts receivable

d. The cost of carrying average accounts receivable

e. all of (a-d) above.

e. all of (a-d) above

NT Inc would like to adjust the price of their brand, based on original, primary consumer data that shows what people think it is worth, relative to competition. This is called….

a. Markup pricing, top down

b. Markup pricing, bottom up

c. Targeted rate of return pricing

d. Perceived value pricing

e. Elasticity of demand

a. Markup pricing, top down

b. Markup pricing, bottom up

c. Targeted rate of return pricing

d. Perceived value pricing

e. Elasticity of demand

d. Perceived value pricing

Mini Blenders Inc. estimates manufacturing unit variable cost as $6. Fixed costs are $20,000 for the year, during which 10,000 units are expected to be sold. A 50% profit margin on unit total cost is desired. What should be MBI’s selling price per unit?

a. $7.20 per unit

b. $12.00 per unit

c. $9.60 per unit

d. $10.00 per unit

e. $7.50 per unit

a. $7.20 per unit

b. $12.00 per unit

c. $9.60 per unit

d. $10.00 per unit

e. $7.50 per unit

b. $12.00 per unit

Frito Lay is concerned about likely cannibalization of their existing salty snack lines by their proposed line of veggie snacks. This is LESS LIKELY to be a MAJOR problem, IF, for the same quantity of product e.g. per pound,

a. The new line’s UVC is higher than the existing line’s UVC

b. The new line’s USP is higher than the existing line’s USP

c. The new line’s $C is higher than the existing line’s $C

d. The new line’s USP is lower than the existing line’s USP

e. The new line’s UVC is lower than the existing line’s UVC

a. The new line’s UVC is higher than the existing line’s UVC

b. The new line’s USP is higher than the existing line’s USP

c. The new line’s $C is higher than the existing line’s $C

d. The new line’s USP is lower than the existing line’s USP

e. The new line’s UVC is lower than the existing line’s UVC

c. The new line’s $C is higher than the existing line’s $C

Sony always sets premium prices in the consumer electronics market, even when they are a late entrant. They probably know a thing or two about…

a. Top down markup pricing

b. Bottom up markup pricing

c. Elasticity of demand

d. Perceived value pricing

e. Targeted rate of return pricing

a. Top down markup pricing

b. Bottom up markup pricing

c. Elasticity of demand

d. Perceived value pricing

e. Targeted rate of return pricing

d. Perceived value pricing

Apple Computer Co. typically calculates the proposed price for one of its new products two way (1) Start with an attractive retail price and then figure out whether Apple can profitably make the product if it sells at that retail price, and (2) Start with how much it costs to produce a unit, add their typical profit margin and then estimate the likely price to the consumer at the retail outlet. In other words,

a. (1) is top down markup pricing, (2) is bottom-up markup pricing

b. (1) is bottom up markup pricing, (2) is top down markup pricing

c. (1) is backward markup pricing, (2) is forward markup pricing

d. (1) is forward markup pricing, (2) is backward markup pricing

e. choices b and c are both correct

a. (1) is top down markup pricing, (2) is bottom-up markup pricing

b. (1) is bottom up markup pricing, (2) is top down markup pricing

c. (1) is backward markup pricing, (2) is forward markup pricing

d. (1) is forward markup pricing, (2) is backward markup pricing

e. choices b and c are both correct

e. choices b and c are both correct

Adibas desires to establish the retail selling price for its new skateboard on the basis of Perceived Value. The average market price for this item is $12.50. Consumers, when asked to allocate 100 points among Adibas and four other competitors, gave Adibas an average of 18 points. Your recommended PV-based Adibas retail price?

a. $ 7.25

b. $14.75

c. $11.25

d. $13.25

e. $9.25

a. $ 7.25

b. $14.75

c. $11.25

d. $13.25

e. $9.25

c. $11.25

Golden State Petroleum Company is running a coupon promotion to popularize its motor oil. They forecast to sell 66,000 cases of which 55% are expected to be coupon sales. When the 55% is broken down further, 75% of that is expected to be new sales. Assuming that each coupon and non-coupon transaction result in positive $C and knowing what you do about the relevant issue here, which of the following part(s) of the breakup of the forecast sales is the main source of adverse profit impact for GSPC?

a. 29,700 cases

b. 22,275 cases

c. 27,225 cases

d. 9,075 cases

e. 7,425 cases

a. 29,700 cases

b. 22,275 cases

c. 27,225 cases

d. 9,075 cases

e. 7,425 cases

d. 9,075 cases

Coupon promotions for consumer non-durables, such as packaged frozen foods, are often money losing propositions for manufacturers such as P&G. That is, the revenue from the promotions does not cover their costs. This results from….

a. Face value of coupon exceeding the selling price of the product

b. Double and triple couponing by local retailers

c. Low redemption rates for coupons

d. High fixed costs of coupons

e. Inability to prevent coupon redemption by existing as opposed to new customers

a. Face value of coupon exceeding the selling price of the product

b. Double and triple couponing by local retailers

c. Low redemption rates for coupons

d. High fixed costs of coupons

e. Inability to prevent coupon redemption by existing as opposed to new customers

e. Inability to prevent coupon redemption by existing as opposed to new customers

In January 2015, Crazy Toys Inc will switch TO a relatively shorter distribution channel (direct to the 4,000 retailers) FROM a relatively longer distribution channel (sell only to 10 wholesalers, who take full responsibility for servicing 4,000 retailers, who then sell to consumers). The product will remain unchanged. Company demand is stable, and hence production quantity will pretty much stay at 2014 levels. Therefore, Crazy Toys Inc is most likely to see…..

a. increased unit manufacturing variable costs.

b. an increase in sales force costs, variable and/or fixed

c. decreased total manufacturing fixed costs

d. decrease in sales force costs, variable and/or fixed

e. choices (a) and (d) above are both likely to happen

a. increased unit manufacturing variable costs.

b. an increase in sales force costs, variable and/or fixed

c. decreased total manufacturing fixed costs

d. decrease in sales force costs, variable and/or fixed

e. choices (a) and (d) above are both likely to happen

b. an increase in sales force costs, variable and/or fixed

Project M has a 10 year life span and you, as the consultant, are looking at its NPV worksheet and notice that Year 3 has a Discount Rate of 0.35. How would you interpret this for the client?

a. Each present dollar is worth 35 cents in year 3

b. Each present dollar is worth 65 cents in year 3

c. Each year 3 dollar is worth 35 cents today

d. Each year 3 dollar is worth 65 cents today

e. None of (a-d) above

a. Each present dollar is worth 35 cents in year 3

b. Each present dollar is worth 65 cents in year 3

c. Each year 3 dollar is worth 35 cents today

d. Each year 3 dollar is worth 65 cents today

e. None of (a-d) above

c. Each year 3 dollar is worth 35 cents today

Adibas desires to establish retail selling price for its new skateboard on the basis of Perceived Value. The average market price for this item is $12.50. Consumers, when asked to allocate 100 points among Adibas and four other competitors, gave Adibas an average of 24 points. Your recommended PV-based Adibas retail price?

a. $10.25

b. $15.00

c. $11.25

d. $12.50

e. none of (a-d) above fits the PV criterion

a. $10.25

b. $15.00

c. $11.25

d. $12.50

e. none of (a-d) above fits the PV criterion

b. $15.00

Golden State Petroleum Company is running a coupon promotion to popularize its motor oil. They forecast to sell 66,000 cases of which 55% are expected to be coupon sales. When the 55% is broken down further, 75% of that is expected to be new sales. Assuming that each coupon and non-coupon transaction result in positive $C and knowing what you do about the relevant issue here, which of the following parts of the breakup of the forecast sales is (are) unlikely to cause adverse profit impact for GSPC?

a. 29,700 cases

b. 22,275 cases

c. 27,225 cases

d. 9,075 cases

e. Both a and c above

a. 29,700 cases

b. 22,275 cases

c. 27,225 cases

d. 9,075 cases

e. Both a and c above

e. Both a and c above

Mini Blenders Inc. has come up with a unit selling price of $10.00. Their Fixed costs are $20,000 for the year, during which 10,000 units are expected to be sold. A 20% profit margin on sales is included in the selling price. What is MBI’s % profit on cost?

a. 25%

b. 33.33%

c. 20%

d. 40%

e. 50%

a. 25%

b. 33.33%

c. 20%

d. 40%

e. 50%

a. 25%

Adibas desires to establish retail selling price for its new skateboard on the basis of Perceived Value. The average market price for this item is $12.50. Consumers, when asked to allocate 100 points among Adibas and four other competitors, gave Adibas an average of 20 points. Your recommended PV-based Adibas retail price?

a. $10.25

b. $15.00

c. $11.25

d. $12.50

e. none of (a-d) above fits the PV criterion

a. $10.25

b. $15.00

c. $11.25

d. $12.50

e. none of (a-d) above fits the PV criterion

d. $12.50

Productivo is considering TWO potential new products, while keeping their existing product. Resources permit only one new product to be added. Their existing product X has a $C of $5 (%C= 25%). New product Y has $C of $3 (%C=60%). New product Z has a $C of $4 (%C=20%). Cannibalization is expected with each new product. You recommend this as the best approach:

a. Figure the impact of X+Y vs X+Z on Productivo’s Total $C, then decide

b. Introduce Z, since its $C is lower than $C for X

c. Introduce Y, since its $C is even lower than $C for Z

d. Introduce Y, since its %C is higher than %C for X

e. Introduce Z, since its %C is lower than %C for X

a. Figure the impact of X+Y vs X+Z on Productivo’s Total $C, then decide

b. Introduce Z, since its $C is lower than $C for X

c. Introduce Y, since its $C is even lower than $C for Z

d. Introduce Y, since its %C is higher than %C for X

e. Introduce Z, since its %C is lower than %C for X

a. Figure the impact of X+Y vs X+Z on Productivo’s Total $C, then decide

b. Introduce Z, since its $C is lower than $C for X

b. Introduce Z, since its $C is lower than $C for X

MM Inc. plans to replace direct sales to 5,000 US retailers spread out all over the country, with indirect sales by incorporating a layer of 15 wholesalers. It would be reasonable for them to expect changes in…..

a. Average value of inventory, valued using CoGS

b. The cost of carrying average inventory, valued using CoGS

c. Average value of accounts receivable

d. The cost of carrying average accounts receivable

e. all of (a-d) above.

a. Average value of inventory, valued using CoGS

b. The cost of carrying average inventory, valued using CoGS

c. Average value of accounts receivable

d. The cost of carrying average accounts receivable

e. all of (a-d) above.

e. all of (a-d) above.

The premium priced Starbucks Coffee maybe one example of a relatively price-inelastic product for which…..

a. Total revenue increases when price is decreased

b. Total revenue increases when price is increased

c. Total revenue decreases when price is decreased

d. Total revenue decreases when price is increased

e. choices b and c above are both correct

a. Total revenue increases when price is decreased

b. Total revenue increases when price is increased

c. Total revenue decreases when price is decreased

d. Total revenue decreases when price is increased

e. choices b and c above are both correct

e. choices b and c above are both correct

Explain Cumulative Discounted Net Cash Flow to I.M. Boss, your CEO. It is…

a. the cumulative actual cash inflow

b. the cumulative present value of all present and future cash inflows minus outflows

c. the cumulative value of all present and future cash inflows minus outflows

d. the cumulative cash outflow

e. none of (a-d) above

a. the cumulative actual cash inflow

b. the cumulative present value of all present and future cash inflows minus outflows

c. the cumulative value of all present and future cash inflows minus outflows

d. the cumulative cash outflow

e. none of (a-d) above

b. the cumulative present value of all present and future cash inflows minus outflows

I.M. Boss asks you to explain why discount rate is important in Net Present Value. You correctly point out that it provides this vital information:

a. The rate of a present cash outflow

b. The rate of a future cash inflow

c. The present value of present and future cash inflows minus outflows

d. The present value of one dollar, received or spent at the specified future point in time

e. The future value of one dollar received or spent today

a. The rate of a present cash outflow

b. The rate of a future cash inflow

c. The present value of present and future cash inflows minus outflows

d. The present value of one dollar, received or spent at the specified future point in time

e. The future value of one dollar received or spent today

d. The present value of one dollar, received or spent at the specified future point in time

Which of these IS UNLIKELY TO create the cannibalization problem, as Nabisco gets ready to add MINTO, a “mint cookie” to its current cookie line?

a. MINTO sales eat into competitor cookie sales

b. MINTO is bought by consumers who never ate any cookies before

c. MINTO is bought as “additional purchase” by Nabisco’s current customers

d.MINTO purchases replace Nabisco’s current customers’ usual Nabisco cookie purchases

e. choices a, b, and c above are all unlikely to result in cannibalization

a. MINTO sales eat into competitor cookie sales

b. MINTO is bought by consumers who never ate any cookies before

c. MINTO is bought as “additional purchase” by Nabisco’s current customers

d.MINTO purchases replace Nabisco’s current customers’ usual Nabisco cookie purchases

e. choices a, b, and c above are all unlikely to result in cannibalization

e. choices a, b, and c above are all unlikely to result in cannibalization

NT Wholesalers would like to investigate the adverse profit impact of maintaining and operating their many warehouses all over the USA. They would benefit by doing say, a past 5 year comparison of…..

a. The dollar cost of carrying average inventory

b. The dollar cost of carrying average accounts receivable

c. The dollar value of average inventory

d. The dollar value of average accounts receivable

e. None of (a-d) above

a. The dollar cost of carrying average inventory

b. The dollar cost of carrying average accounts receivable

c. The dollar value of average inventory

d. The dollar value of average accounts receivable

e. None of (a-d) above

a. The dollar cost of carrying average inventory

ABC mfg co has estimated breakeven volume of 50,000 units for its new widget. If fixed costs are $100,000, unit selling price is $25.00 and ABC sales force commission is 8% of selling price, what is their %contribution?

a. $2.00

b. 8%

c. 10%

d. 5%

e. 9%

a. $2.00

b. 8%

c. 10%

d. 5%

e. 9%

b. 8%

The Houston Astros discover by carrying out research on select game days that for a relatively price-elastic product such as a ball game, (up to a point, of course)…..

a. Total revenue increases when price is decreased

b. Total revenue increases when price is increased

c. Total revenue decreases when price is decreased

d. Total revenue decreases when price is increased

e. choices a and d above are both correct

a. Total revenue increases when price is decreased

b. Total revenue increases when price is increased

c. Total revenue decreases when price is decreased

d. Total revenue decreases when price is increased

e. choices a and d above are both correct

e. choices a and d above are both correct

You point out to I.M. Boss, your CEO, that in NPV analysis, a new project is likely to be rated positively if….. (a) the cumulative discounted net cash flow is positive and substantial, (b) the payback period is reasonable, compared to the project life, and (c)……

a. the % cost of capital is much lower than the % Discount rate

b. the % cost of capital is much lower than the % Internal Rate of Return

c. the % cost of capital is much greater than % Discount Rate

d. the % cost of capital is zero

e. the % cost of capital is much greater than the % Internal Rate of Return

a. the % cost of capital is much lower than the % Discount rate

b. the % cost of capital is much lower than the % Internal Rate of Return

c. the % cost of capital is much greater than % Discount Rate

d. the % cost of capital is zero

e. the % cost of capital is much greater than the % Internal Rate of Return

b. the % cost of capital is much lower than the % Internal Rate of Return

For 2015, Dow Chemical would like to reach a certain $ profit goal, while comparing the alternatives of increasing the commission % paid to its field reps versus increasing their salaries. You point out that such issues can be easily investigated through…..

a. channel markups analysis for 2015

b. cannibalization analysis for 2015

c. net present value analysis for 2015

d. comparison of # and/or $ RLS to reach 2015 profit goal

e. displaced demand analysis for 2015

a. channel markups analysis for 2015

b. cannibalization analysis for 2015

c. net present value analysis for 2015

d. comparison of # and/or $ RLS to reach 2015 profit goal

e. displaced demand analysis for 2015

d. comparison of # and/or $ RLS to reach 2015 profit goal

In this course, we encountered the cannibalization problem in the context of…

a. choices (b) and (c) below

b. Promotion decisions

c. Product decisions

d. Price decisions

e. Place decisions

a. choices (b) and (c) below

b. Promotion decisions

c. Product decisions

d. Price decisions

e. Place decisions

a. choices (b) and (c) below

NT Wholesalers would like to investigate the adverse profit impact of delayed retailer payments. They would benefit by doing say, a past 5 year comparison of…..

a. The dollar cost of carrying average inventory

b. The dollar cost of carrying average accounts receivable

c. The dollar value of average inventory

d. The dollar value of average accounts receivable

e. None of (a-d) above

a. The dollar cost of carrying average inventory

b. The dollar cost of carrying average accounts receivable

c. The dollar value of average inventory

d. The dollar value of average accounts receivable

e. None of (a-d) above

b. The dollar cost of carrying average accounts receivable

Explain Payback Period (based on class/M11 discussion) to I.M. Boss, your CEO. It is…

a. the total life span of the project in number of periods (years, for example)

b. the year in which Net Cash Flow is maximized

c. the year in which Discounted Net cash Flow is maximized

d. the year in which Cumulative Discounted Net Cash Flow (CDNCF) is maximized

e. that point in time when the Cumulative Discounted Net Cash Flow reaches $0

a. the total life span of the project in number of periods (years, for example)

b. the year in which Net Cash Flow is maximized

c. the year in which Discounted Net cash Flow is maximized

d. the year in which Cumulative Discounted Net Cash Flow (CDNCF) is maximized

e. that point in time when the Cumulative Discounted Net Cash Flow reaches $0

e. that point in time when the Cumulative Discounted Net Cash Flow reaches $0

Mini Blenders Inc. has come up with a unit selling price of $10.00. Their Fixed costs are $20,000 for the year, during which 10,000 units are expected to be sold. A 20% profit margin on sales is included in the selling price. What is MBI’s unit variable cost?

a. $9 per unit

b. $8 per unit

c. $7 per unit

d. $6 per unit

e. $5 per unit

a. $9 per unit

b. $8 per unit

c. $7 per unit

d. $6 per unit

e. $5 per unit

d. $6 per unit

Explain to I.M. Boss, your CEO. The “substantial” criterion in NPV analysis….

a. Refers to Payback period in years. The longer the better.

b. Refers to %IRR. Should be smaller than cost of capital.

c. Refers to $NPV. Usually compared to $ invested in the project.

d. Refers to % cost of capital. Should be > 20%.

e. Refers to the Discount Rate decimal. Must be > 1.

a. Refers to Payback period in years. The longer the better.

b. Refers to %IRR. Should be smaller than cost of capital.

c. Refers to $NPV. Usually compared to $ invested in the project.

d. Refers to % cost of capital. Should be > 20%.

e. Refers to the Discount Rate decimal. Must be > 1.

c. Refers to $NPV. Usually compared to $ invested in the project.

You are wondering how to explain price elasticity of demand to the management of the Houston Astros baseball team, in user-friendly language. As you know, price elasticity may be calculated using the formula in which the denominator is…

[(New Quantity – Old Quantity) / Old Quantity]

——————————————

[(New Price – Old Price) / Old Price]

a. relative change in quantity

b. relative change in price

c. % change in quantity

d. % change in price

e. choices b and d above are both correct

e. choices b and d above are both correct

In this course, we did not encounter the cannibalization problem in the context of…

a. choices (d) and (e) below

b. Promotion decisions

c. Product decisions

d. Price decisions

e. Place decisions

a. choices (d) and (e) below

b. Promotion decisions

c. Product decisions

d. Price decisions

e. Place decisions

a. choices (d) and (e) below

Apple Computer Co. typically calculates the proposed price for one of its new products two ways. (1) Start with how much it costs to produce a unit, add their typical profit margin and then estimate the likely price to the consumer at the retail outlet, and (2) Start with an attractive retail price and then figure out whether Apple can profitably make the product if it sells at that retail price. In other words,

a. (1) is top down markup pricing, (2) is bottom-up markup pricing

b. (1) is bottom up markup pricing, (2) is top down markup pricing

c. (1) is backward markup pricing, (2) is forward markup pricing

d. (1) is forward markup pricing, (2) is backward markup pricing

e. choices a and d are both correct

a. (1) is top down markup pricing, (2) is bottom-up markup pricing

b. (1) is bottom up markup pricing, (2) is top down markup pricing

c. (1) is backward markup pricing, (2) is forward markup pricing

d. (1) is forward markup pricing, (2) is backward markup pricing

e. choices a and d are both correct

e. choices a and d are both correct

You would like to determine the profit impact of adding a new product that has similarities with an existing product (same customers, same use etc.). If you use the Incremental Approach, this information is NOT needed.

a. $C for the existing and the new products

b. Sales forecast for the new product, cannibalized sales

c. Sales forecast for the new product, non-cannibalized sales

d. Sales forecasts for the existing product, before and after the new product

e. None of the above i.e. All of the above ARE NEEDED for this approach

a. $C for the existing and the new products

b. Sales forecast for the new product, cannibalized sales

c. Sales forecast for the new product, non-cannibalized sales

d. Sales forecasts for the existing product, before and after the new product

e. None of the above i.e. All of the above ARE NEEDED for this approach

d. Sales forecasts for the existing product, before and after the new product

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