Chapter 19: Pricing Program Services

Question 1

PMAS step 5

Answer 1

cost-volume profit analysis

Question 2

variable costs

Answer 2

change directly and proportionally with changes in volume

Question 3

fixed costs

Answer 3

do not change with changes in volume

Question 4

changed fixed costs

Answer 4

change in the same direction, but not proportionally, with changes in volume or the number of participants

Question 5

revenue

Answer 5

income that comes from a variety of sources
money generated for the operation of the organization and its programs

Question 6

cost volume profit analysis allows the programmer to

Answer 6

match the revenue with the expenses of an activity and to simultaneously account for changes in volume (participation level) with changes in production costs

Question 7

the data generated from the cost volume profit analysis informs the programmer about

Answer 7

the actual costs of providing services

Question 8

with the profit analysis information it is the possible to make

Answer 8

cost based decisions regarding the price to be charged for the services

Question 9

example of fixed cost

Answer 9

does not matter how many participants, bring in one instructor

Question 10

example of changing fixed costs

Answer 10

ratio: 6 kids for 1 instructor, 12 for 2

Question 11

net profit=

Answer 11

revenues - expenses
if revenue exceeds expenses, program generates a profit

Question 12

net loss=

Answer 12

expenses - revenues
if expenses exceed revenues, program generates a loss

Question 13

if revenues = expenses

Answer 13

then break even

Question 14

revenue sources

Answer 14

entrance fee
user fees
rental fees
tax dollars
fundraising
grants
gifts and donations
volunteers
sponsorships
partnerships

Question 15

step 6 of PMAS

Answer 15

establishing a price

Question 16

establishing a price is determined by

Answer 16

agency pricing policy as well as analyzing the costs associated for the program

Question 17

when establishing price but determine 3 service category

Answer 17

public, merit or private

Question 18

public

Answer 18

offered at no cost to the public

Question 19

merit

Answer 19

offered at a price that is less than the required for full-cost recovery

Question 20

private

Answer 20

offered at a price that enables the agency to recover its production costs fully

Question 21

before establishing a price, programmer must

Answer 21

anticipate possible consumer resistance to a price
attitude of target market toward pricing
price elasticity

Question 22

price elasticity

Answer 22

the relationship of the activity being charged to the overall price for participation

Question 23

attitudes about pricing often come from

Answer 23

past use and past fee paying

Question 24

example of price elasticity

Answer 24

tourist attractions
prices are somewhat inelastic because price of admission is small part of total cost of trip
therefore price could be raised without adversely affecting demand

Question 25

the final price established must be based on

Answer 25

the agency's pricing policy, the target market's attitude toward pricing, and there ability to pay

Question 26

public services

Answer 26

agencies offer public services at no charge to the user they do not recover any production costs

Question 27

cost volume profit info for public services simply informs programmer about

Answer 27

costs of producing the various services provided at no charge to the public

Question 28

cost volume profit info for public services is useful for documenting

Answer 28

where agency spends its resources, for identifying which groups have been receiving subsidized services, and for determining the cost of each program service provided

Question 29

merit services

Answer 29

agencies offer merit services at a price that permits a partial recovery of agency costs

Question 30

programmer determines the price charged for a merit service through

Answer 30

production costs, the dollars available from other sources for subsidizing program, and agency's policies regarding type of program

Question 31

dollars from other sources for subsidizing program

Answer 31

donations and tax dollars

Question 32

through subsidies allocated to merit services, programmer implements the

Answer 32

social justice function of the agency, so allocation of subsidies occurs with accurate cost data

Question 33

private services

Answer 33

agencies offer private services at a price that enables them to recover all their direct and indirect costs of producing the program

Question 34

for an agency to make a profit and stay in business, it must

Answer 34

make a margin of profit beyond production costs

Question 35

normal for private services to determine production costs at an

Answer 35

estimated level of volume and then add a margin of profit to production costs

Question 36

contribution margin

Answer 36

contribute a margin of profit to the overall profits