MGT301- Quiz 1 Solution and Discussion

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2. Company B is an internet service provider company and it has launched two different packages which charge a fixed and some variable rates according to usage in a month. Company B is using which type of product mix pricing strategies? MGT301

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3. A firm establishes which of the following pricing objectives to maintain or increase its product’s sales in relation to total industry sales? MGT301

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4. A situation where potential suppliers quote a confidential price to the buyer refers to which one of the following options? MGT301

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5. In which of the following pricing the seller selects a given city as a “basing point” and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped? MGT301

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6. Lawyers, accountants, and other professionals typically price by adding a standard markup for profit that reflects which one of the following concepts?

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7. Once a product prototype is developed, it is ready to enter into which of the following stage of new product development? MGT301

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8. Quantity discounts are a legal form of price discrimination. A quantity discount is a price reduction to buyers who purchase _____. MGT301

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9. Setting low prices to encourage initial product trial and to generate sales growth reflects which one of the following pricing method? MGT301

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10. The economic sacrifice made by a buyer to a seller for products or services refers to which one of the following price? MGT301

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11. What might be the effect of a successful price increase on profits?

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12. When a company cannot supply all its customers’ needs; what would be an effect on price? MGT301

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13. When Kodak sets the price range of its cameras as low priced and its related film as high priced, it is practicing which one of the following pricing decision? MGT301

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14. Which of the following statements about government regulation of pricing is true? MGT301

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15. Which type of cost-oriented pricing is most closely related to markup pricing? MGT301

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said in MGT301- Quiz 1 Solution and Discussion:

A company which is dealing in shirts utilizes a push strategy to sell the shirt line. Its basic promotional tool is discount. These discounts offered to middlemen are referred to as which one of the following discounts? MGT301

In the context of MGT301 (Principles of Marketing), these discounts offered to middlemen (wholesalers and retailers) as part of a push strategy are known as Trade Discounts (also commonly called Functional Discounts).

Why “Trade Discount”?

In a Push Strategy, the manufacturer “pushes” the product through the distribution channel by providing incentives to the middlemen to carry the brand and promote it to the final customers.

• Trade (Functional) Discount: This is a reduction from the list price offered by a manufacturer to channel members for performing functions such as selling, storing, and record-keeping.
• The Goal: It makes the shirt line more profitable for the retailer to stock compared to a competitor’s brand, encouraging them to give your shirts better shelf space.

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Other Common Discounts in MGT301

To ensure you have the right answer for your exam or assignment, here is how a Trade Discount differs from other types:

Discount Type	Purpose
Quantity Discount	A price reduction to buyers who buy large volumes.
Cash Discount	A price reduction to buyers who pay their bills promptly (e.g., “2/10, net 30”).
Seasonal Discount	A price reduction to buyers who buy merchandise out of season (e.g., buying winter coats in summer).
Promotional Allowance	Payments or price reductions to reward dealers for participating in advertising and sales support programs.

Key takeaway for your scenario: Because the company is targeting middlemen specifically to motivate them within a push strategy, the most accurate term is a Trade/Functional Discount.

Would you like me to explain the difference between a Push Strategy and a Pull Strategy in more detail?

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said in MGT301- Quiz 1 Solution and Discussion:

15. Which type of cost-oriented pricing is most closely related to markup pricing? MGT301

In the context of MGT301, the type of cost-oriented pricing most closely related to markup pricing is Cost-Plus Pricing.

While the terms are often used interchangeably in general business, they have a specific relationship in marketing theory:

The Relationship

Cost-Plus Pricing is the broader method of adding a standard percentage of profit to the total cost of a product. Markup Pricing is the specific application of this method, most commonly used by intermediaries (wholesalers and retailers) who buy a product and add a specific “markup” to its cost to determine the selling price.

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Key Differences in MGT301 Terms

To help you distinguish them for an exam, here is how they are usually categorized:

• Markup Pricing: Adding a standard dollar amount or percentage to the cost of the item to reach the selling price. (Example: A retailer buys a shirt for $10 and adds a 50% markup to sell it for $15).
• Cost-Plus Pricing: Adding a predetermined profit margin to the unit costs of production. This is more common in manufacturing or construction where total costs are calculated first, then a profit “plus” is added.

Other Related Pricing Methods in MGT301:

• Target-Profit Pricing (Break-Even Pricing): Setting a price to break even on the costs of making and marketing a product, or setting a price to make a specific target return.
• Experience Curve Pricing: Pricing low based on the expectation that production costs will fall as the company gains experience and efficiency.

Would you like me to show you the formula for calculating a “Markup on Selling Price” vs. a “Markup on Cost”?