Use This Information for Question That Refer to the Pricing

question 303

Multiple Choice

Use this information for question that refer to the Pricing 1 case.(WPI) case. As a project for her marketing class,Emily Washington is researching how five local businesses price their products.The following are brief sketches of what she has learned about each company.
At Bella Computers,Emily has discovered that the company earned a 6 percent return on investment this year and wants to increase it to 9 percent next year.To its retailer customers,Bella Computers gives cash discount terms of 2/10,net 30.It also gives retailers a 3% reduction on the invoice amount for advertising Bella products locally.Bella gives retailers' salespeople 2% of the sale price for each Bella Computer they sell.
At Ross Pharmaceuticals,she learned that the company has invested heavily in developing a new product that recently received a patent.Because cash is tight,the company wants to achieve a rapid return on its investment.The new patented product is badly needed in the market,so a very inelastic demand curve is expected.
Digital Imaging makes photographic prints for wedding photographers.It is very concerned about competitor reactions to its pricing,so it has selected prices that will not draw the attention of the competition and not start a price war.Digital Imaging offers customers an 8% discount if their purchases exceed $20,000 a year.
Jack's One Hour Cleaners recently opened for business.The company invested a lot of money in new equipment,and feels that it has to quickly get "at least 10% market share to stay in the game." This need obviously influences the company's pricing decisions.Jack's also plans to offer customers 20% discounts on any order over $20.
National Printing Equipment (NPE) produces equipment that helps to print newspapers and magazines.The company sells directly to printers and through wholesalers.Its salespeople negotiate prices with individual customers and often have to match competitors' prices.NPE has a new product,the Gutenberg NP201,with some competitive advantages now,but competitors are expected to follow quickly with similar products.The new product is being introduced into a market with elastic demand.Regarding freight charges for its equipment,NPE's invoice reads,"Seller pays the cost of loading equipment onto a common carrier.At the point of loading,title to such products passes to the buyer,who assumes responsibility for damage in transit,except as covered by the transportation agency."
Which business offers a NONCUMULATIVE quantity discount?

• A) Jack's One Hour Cleaners
• B) Digital Imaging
• C) National Printing Equipment
• D) Ross Pharmaceuticals
• E) Bella Computers

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Definitions:

Consolidated Financial Statements

Financial reports that display the economic condition, operational outcomes, and cash movements of a parent company and its subsidiary companies as one consolidated entity.

Pooling-of-interests Method

A merger accounting method where the assets and liabilities of merging companies are combined using their book values.

Acquisition Method

An accounting approach used to consolidate the financial statements of two companies when one company acquires control over the other.

Purchase Method

An accounting method used in mergers and acquisitions where the assets and liabilities of the acquired company are added to the acquirer's balance sheet at their fair market values.