Chapter 3

Question 1

when the setting of an item’s initial price begins with a consideration of the item’s costs, the process is known as

Answer 1

Cost-based pricing. ​

Question 2

the simplest form of cost-based pricing.

Answer 2

Cost plus Pricing

Question 3

It is common to companies that sell customized products.

Answer 3

Cost plus pricing

Question 4

This pricing method involves determining the amount to be added to an item’s cost and then adding that amount to arrive at the item’s price.

Answer 4

Cost plus pricing

Question 5

Cost plus pricing formula

Answer 5

P = C+ added amount

Question 6

The percentage used could be the same for all the company’s products or there could be a separate standard percentage for each type of product sold by the company

Answer 6

Mark Up pricing

Question 7

The standard percentage used in markup pricing

Answer 7

Mark up

Question 8

Formula for markup percentage

Answer 8

M = (added amount / C) x 100

Question 9

Markup percentage for wholesaling

Answer 9

20%

Question 10

doubling an item’s cost to arrive at its price

Answer 10

keystone pricing

Question 11

Markup percentage for retailing

Answer 11

100%

Question 12

Markup percentage for restaurants

Answer 12

200%

Question 13

Markup percentage for Alcoholic beverages

Answer 13

300%

Question 14

Formula for setting initial price using Markup Pricing

Answer 14

P = C + [(M/100) × C]​

Question 15

The process of determining the amount to be added to a product’s costs to arrive at its price is often heavily influenced by the PROFIT GOALS of the organization

Answer 15

gross margin pricing

Question 16

it is the amount of a company’s sales revenue that remains after subtracting the cost of goods sold. It is usually expressed in PERCENTAGE

Answer 16

Gross margin

Question 17

The percent gross margin is the gross margin as a percentage of the ____________

Answer 17

Sales revenue

Question 18

T or F

A unit gross margin is the gross profit portion of a price expressed in percentage

Answer 18

False. A unit gross margin is the gross profit portion of a price expressed in MONETARY VALUE

Question 19

Unit gross margin formula

Answer 19

Price - Cogs

Question 20

is the AMOUNT ADDED to an item’s cost as a PERCENTAGE of that COST.​

Answer 20

Markup

Question 21

it is the AMOUNT ADDED to an item’s cost expressed as a PERCENTAGE of the ITEM’S PRICE

Answer 21

Percent gross margin

Question 22

is the amount of a company’s sales revenue that remains after SUBTRACTING the cost of goods sold. It is usually expressed in PERCENTAGE

Answer 22

Gross Margin

Question 23

% GROSS MARGIN​

Answer 23

%GM = (added amount/P) × 100 ​

Question 24

This pricing involves two ways in using percent gross margin to set a price

Answer 24

Gross Margin Pricing

Question 25

The first method in Margin Pricing is to convert the PERCENT GROSS MARGIN to the more _____________________ (M).

Answer 25

INTUITIVE MARKUP PERCENTAGE

Question 26

The second way of using a gross margin for price setting is to compute the _________________from the gross margin percentage.

Answer 26

product’s price directly

Question 27

GROSS MARGIN PRICING​ FORMULA

Answer 27

M = %GM × [100 / (100 − %GM)]​ P = C + [(M/100) × C]​ P = C / [1 − (%GM/100)]