Question

Topic: Pricing Strategy and Management

Question 5

1. Which of the three primary pricing strategies considers what the customer is willing to pay for your offering?

   	A.	Competitor-based pricing
   	B.	Value-based pricing
   	C.	Revenue-based pricing
   	D.	Cost-plus pricing

Question 6

1. Which of the three primary pricing strategies is little more than a simple mark-up or profit margin?

   	A.	Competitor-based pricing
   	B.	Value-based pricing
   	C.	Revenue-based pricing
   	D.	Cost-plus pricing

Question 7

1. Your industry currently sells 500,000 units a year. Your break-even sales volume is 52,000 units; the product has a contribution margin of 36%. One of your marketing directors is convinced that an 8% drop in price will make your offering more competitive. If you were to implement this suggestion, how will your unit-volume market share need to change to break even?

   	A.	Increase 26%
   	B.	Decrease 10%
   	C.	Decrease 26%
   	D.	Increase 29%

Question 8

1. When your goal is to position your offering as prestigious, you may want to set the price low so that more people will try it and see the high quality.

   True

   False

Answer 1

5.

A,B,C

(Under Cost plus, the pricing is irrelevant of the customer. Hence, other than cost plus remaining three pricing strategies considers what the customer is willing to pay for)

6.

A,B,C

(Under Cost plus, the company just focus on Cost incurred and the margin it wnats and it does not consider anything which are qualitative. hence, other than cost plus, lefo over three strategies are more tham the markup or profit margin)

7. D

Say Selling price = 100

Contribution Margin = 36

Fixed Cost = Breakeven sales units * Contribution Margin = 52000 * 36 = 1872000

Revised Contribution margin = 36 - 8 = 28

Revised Break even units = 1872000 / 28 = 66858 Units

Percentage Increase = (66858-52000)/52000 = 28.57% = 29% (Option D)

8. TRUE