CHAP 9: PRICING

1/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. When they set price is $10.00/units, they are able to sell 2,000 units, but when they cut price by 5%, their sales volume increases to 2,250. The price elasticity of demand for their product is_______________

• a. -1.5
• b. -2.5
• c. -2.0
• d. -1.0

2/Based on the relationship between price elasticity of demand & profitability, when the demand for a product/service is elastic then price reductions relative to the baseline price result in ________ in profitability, and price increases result in __________ in profitability.

• a. maximum sales; minimum sales
• b. minimum sales, maximum sales
• c. gains; losses
• d. losses; gains

3/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. Following are its income and costs for a typical month:

Sales (units): 2,000 units Price: $10.00/unit

Variable cost: $5.50/unit Admin overhead (fixed costs): $ 6,000.

Pilot is considering a 5 percent price cut, which it believes would be enabling it to further increase its sales. How much percent breakeven sales change for this company to get the same profit as it did before?

• a. 13.50%
• b. 11.50%
• c. 14.50%
• d. 12.50%

4/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. Following are its income and costs for a typical month:

Sales (units): 2,000 units Price: $10.00/unit

Variable cost: $5.50/unit Admin overhead (fixed costs): $ 6,000.

How much profit does this company obtain?

• a. $4,000
• b. $5,000
• c. $6,000
• d. $3,000

5/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. Following are its income and costs for a typical month:

Sales (units): 2,000 units Price: $10.00/unit

Variable cost: $5.50/unit Admin overhead (fixed costs): $ 6,000.

Pilot is considering a 5 percent price cut, which it finds out the percent breakeven (BE) sales change in unit volume terms was 12.50%. What is the corresponding percent BE sales change in dollar sales terms?

• a. 6.88%
• b. 8.88%
• C. 5.88%
• d. 7.88%

6/A company’s past expenditures on machinery unable to change regardless of any decisions made in the present are called ________________costs.

• a. incremental
• b. sunk
• c. non-incremental
• d. fixed

7/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. Following are its income and costs for a typical month:

Sales (units): 2,000 units Price: $10.00/unit

Variable cost: $5.50/unit Admin overhead (fixed costs): $ 6,000.

Pilot is considering a 5 percent price cut. Suppose that its price cut is accompanied by a reduction in variable cost of $0.25 per unit. Variable costs are $5.50 before the price change and $5.25 after the price change. How much percent breakeven sales change for this company to get the same profit as it did before?

• a. 5.88%
• b. 7.88%
• c. 6.88%
• d. 4.88%

8/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. Following are its income and costs for a typical month:

Sales (units): 2,000 units Price: $10.00/unit

Variable cost: $5.50/unit Admin overhead (fixed costs): $ 6,000.

Suppose a product manager is evaluating a $1,000 fixed to increase the production capacity. How many units must be sold for the firm to recover the $1,000 incremental investment?

• a. 22 units
• b. 322 units
• c. 122 units
• d. 222 units

9/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. Following are its income and costs for a typical month:

Sales (units): 2,000 units Price: $10.00/unit

Variable cost: $5.50/unit Admin overhead (fixed costs): $ 6,000.

Suppose a product manager is evaluating a $1,000 fixed to increase the production capacity. How many units must be sold for the firm to recover the $1,000 incremental investment?

• a. Buy-response survey
• b. In-store experiment
• c. In-depth interview
• d. Simulated purchase experiments

10/Pilot Manufacturing is a company that makes high-quality pen for sale through bookstores. Following are its income and costs for a typical month: Sales (units): 2,000 units Price: $10.00/unit Variable cost: $5.50/unit Admin overhead (fixed costs): $ 6,000. Pilot is considering a 5 percent price cut, which it believes would be enabling it to further increase its sales. How many units breakeven sales change for this company to get the same profit as it did before?

• a. 350 units
• b. 250 units
• c. 200 units
• d. 300 units