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Exam 15: Pricing of Services

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Question 1

Multiple Choice

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The basic formula for _____ is Price = Direct costs + Overhead + Profit margin.

A) Contribution margin
B) Return on investment
C) Cost-based pricing
D) ABC costing
E) Net profit

F) B) and D)
G) A) and D)

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Question 2

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Promotional pricing may be less meaningful for services,for which price anchors do not exist,than for goods,for which they do.

A) True
B) False

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Question 3

Multiple Choice

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Pizza Hut,Uncle Sam's,Domino's,and Papa John's all deliver pizza in Cartersville,Georgia,a town of about 30,000.As a result,one would expect all of the pizza delivery services to use _____-based pricing.

Because most people like to get tattoos and body piercings on the weekends,a tattoo parlor in Portland,Maine,offers a reduced rate Monday to Thursday for all of its services.Prices on Friday and Saturday are 45 percent higher than they are during the rest of the week.The tattoo parlor is using a(n) _____ pricing strategy.

If you visit a county or state fair,you will pay a basic admission fee plus other fees if you want to enjoy any of the amusement rides.County and state fairs that price this way are using:

What kind of a pricing strategy is a crafts show using when it charges a lower entry fee for teenagers and senior citizens?

Since customers naturally look for price anchors,as well as familiar services,against which to judge focal services,price framing is an appropriate strategy to use for pricing many types of services.

In order to find the best veterinarian service for her prized German Shepherd,Vonda interviewed several different veterinarians and did extensive research before she found one she thought provided value.What kind of a nonmonetary cost did Vonda expend as she interviewed different vets?

The most commonly known form of results-based pricing is a practice called mixed bundling.

The New York Yankees,a major league baseball team,offer half-price tickets for high school and college students every Wednesday home game at Yankee Stadium.The New York Yankees are using a(n) _____ pricing strategy.

The price for an all-day trip to the Alpine Spa is $235 and includes an hour-long massage,a facial,a manicure and pedicure and a hair styling and make-up application.Any of these services can be purchased individually for the total cost of almost $350.What kind of pricing strategy is Alpine Spa using?

Celeste has a 4-year old daughter and often employs one of the many teenagers in her neighborhood who regularly baby-sit.When one of the teens raised her price to $5.75 per hour,all of the other babysitters followed suite.Not surprisingly,when another teen tried to increase his babysitting hours by lowering his rate to $5.25,all of the other teens made the same reduction in their rates.What kind of a competition-based strategy does this example depict?

To calculate what it charges a client,a detective agency charges $200 a day direct costs plus an additional $50 per day to pay for office expenses,licenses,and other fixed costs and fifteen percent of full costs for the profit margin.What type of pricing strategy is being used by the detective agency?

If a family has one child enrolled in Diane's Day Care Center,it costs $75 per week.If a family has two children enrolled at Diane's,it costs $135.Diane's is using a(n) _____ differential.

Consumer resistance to using self-checkout lines has resulted from a _____ cost in using a new service.

Describe the three strategies associated with the complementary pricing of a service.

After moving to Florida,Kaori opened both a savings and a checking account at Benford Bank.Although Benford had a higher minimum balance requirement for free checking than the other two banks she considered,Kaori chose Benford because it was located closer to her home than the other banks.Kaori would rather expend other costs than _____ costs.

Discuss the reasons why customer knowledge of service prices may differ from customer knowledge of goods prices.

Demand-based pricing does not consider that customers might be sensitive to nonmonetary prices and may judge quality on the basis of price.

Price visibility does not influence reference prices when selecting a stockbroker.