Test Bank for Financial & Management Accounting An Introduction 4Ed Ch 2 by Pauline Weetman

TEST BANK

Financial and Management Accounting: An Introduction TEST BANK

Chapter 1 : Developing Marketing Strategies and a Marketing Plan

True / False Questions 1. Strong supplier relations and efficient supply chains help firms such as Walmart to achieve operational excellence.

True False 2. To build a sustainable competitive advantage, companies should focus on a single strategy.

True False 3. It is not always necessary to go through all the steps in the marketing planning process.

True False 4. A mission statement describes the specific actions a firm will take to achieve its goals.

True False 5. iTunes software is often credited for the success of the Apple iPod MP3 player, because it made the iPod easier to use than competing players, and was difficult for competitors to duplicate. This is an example of a sustainable competitive advantage.

True False 6. STP refers to segmentation, testing, and promotion.

True False 7. The components of a SWOT analysis are Strengths, Weaknesses, Opportunities and Tactics.

True False 8. Firms are typically more successful when they focus on opportunities that build on their competitors' strengths.

True False 9. Duke's is a surfer-themed restaurant chain in Hawaii. Most of its customers are tourists. In a SWOT analysis for Duke's, the possibility that the recession might cut back on tourism in Hawaii would be considered a Weakness.

True False 10. Price should be based on the value that the customer perceives.

True False

11. Geraldo manages the electrical turbine engine division of General Electric Corporation. He makes most decisions independently, without consulting headquarters. Geraldo manages a strategic business unit.

True False 12. The marketing planning process always proceeds sequentially through the five steps.

True False 13. Isaac is looking for ways to offer new goods and services to his existing customers. He is pursuing a market development strategy.

True False 14. If Starbucks decided to start selling organic meals to corporate eating facilities, it would be pursuing a diversification strategy.

True False 15. Sandisk's MP3 player product line (called the Sansa) has a low relative market share. The MP3 player market is expected to decline over the next few years. In BCG portfolio analysis, the Sansa would be considered a dog.

True False 16. The "Implement Marketing Mix" step of the strategic marketing planning process is part of the control phase.

True False

Multiple Choice Questions 17. If a firm wants to develop a sustainable competitive advantage, it should: A. begin an aggressive campaign to buy up competitors.

B. copy the innovative features of other firms that are attractive to customers.

C. examine its operations and customer relations to identify significant things competitors cannot easily copy.

D. increase its marketing budget so that it outspends its competitors.

E. arrange to meet with competitors to discuss how to avoid direct competition.

18. Which of the following is NOT one of the four overarching strategies to create and deliver value and to develop sustainable competitive advantage?

A. Locational excellence B. Customer excellence C. Operational excellence D. Product excellence E. Planning excellence 19. When Ramona, the keynote speaker at a major business leaders' conference, arrived in the middle of the night at the Ritz-Carlton, she was exhausted and her suit was wrinkled from her ten-hour plane trip. The night clerk found someone to dry clean Ramona's suit and have it ready for her morning presentation. She has been a loyal Ritz-Carlton customer ever since. In this example, RitzCarlton demonstrated the macro strategy of: A. customer excellence B. operational excellence C. product excellence D. promotional excellence E. global excellence 20. Taking steps to encourage customer loyalty is one way to: A. test new products.

B. promote efficiency.

C. sustain an advantage over competitors.

D. develop new pricing strategies.

E. improve supply chain effectiveness.

21. Some banks have begun offering special accounts designed to attract junior high school students.

These kids save in such small amounts that the accounts cost banks more to maintain than they are worth. But bankers know that consumers are creatures of habit and hope that the young people they serve now will become adult customers. These banks recognize: A. that operational excellence is an important macro strategy.

B. the lifetime value of customers.

C. that product excellence leads to loyal customers.

D. the importance of making decisions based on short-term results.

E. that as long as customers bring in some revenue, costs do not matter.

22. Narbonne's, an upscale department store, instructs sales personnel that whenever a customer asks where something is, they should drop what they are doing and offer to escort the customer to what they are looking for. The company's reputation for excellent customer service has probably resulted in: A. product design excellence.

B. mission statement satisfaction.

C. sustainable price decreases.

D. a sustainable competitive advantage.

E. producer excellence.

23. Firms achieve

_ through efficient procedures and excellent supply chain management.

A. customer excellence B. locational excellence C. customer loyalty D. value-based pricing E. operational excellence 24. Marketers want their firms to develop excellent supply chain management and strong supplier relations so they can: A. persuade stores to refuse to carry competitors' products.

B. use their power within the supply chain to force weaker firms to accept less favorable pricing.

C. control prices and lock in margins.

D. create a sustainable competitive advantage.

E. justify charging higher prices than competitors do.

25. For many years, Southwest Airlines distinguished itself as the low-cost airline. Now, many other low-cost competitors have entered the market. Similarly, Southwest was one of the first airlines to offer online ticketing. Now, all airlines have online ticketing. These examples suggest that: A. no single strategy is likely to be sufficient to build a sustainable competitive advantage.

B. situation analysis is a continuous process.

C. customers rarely remain loyal to companies.

D. product excellence is the only true source of a sustainable competitive advantage.

E. innovation is pointless because competitors will develop copycat offerings.

26. "Effective marketing doesn't just happen." It is: A. promoted through STP analysis.

B. possible only for seasoned marketing executives to achieve.

C. planned.

D. introduced through control phase SBUs. E. the result of competitor's failures.

27. Carla has been directed by her regional marketing manager to cut prices on seasonal items, submit an ad in the local paper, and tell distributors to reduce deliveries for the next month. Which step of the strategic marketing planning process is Carla engaged in?

A. evaluate performance B. define the business mission.

C. situation analysis D. implement marketing mix and resources.

E. identifying and evaluating opportunities.

28. When conducting a SWOT analysis, in what phase of the strategic marketing process is an organization presently engaged?

A. planning B. implementation C. control D. segmentation E. metrics 29. The automobile manufacturing industry closely watches annual consumer satisfaction surveys. For years, Japanese car companies consistently had the highest levels of customer satisfaction, creating a _ for these companies.

A. strategic marketing plan B. clear mission statement C. cost advantage D. sustainable competitive advantage E. diversification strategy

30. Which of the following is LEAST likely to provide a sustainable competitive advantage?

A. Lowering prices.

B. Having a well-known brand name.

C. Achieving high levels of customer satisfaction.

D. Using patented technology.

E. Creating an efficient supply chain.

31. Even when large discount retailers enter a market, a few small, local retailers survive and prosper.

These small retailers have probably developed a(n) _ _ that allows them to survive.

A. advertising campaign B. plan to evaluate results C. sustainable competitive advantage D. set of performance metrics E. SWOT analysis 32. As part of her company's SWOT analysis, Valerie is assessing the company's internal environment, including: A. strengths.

B. opportunities.

C. strengths and weaknesses.

D. threats.

E. opportunities and threats.

33. Samantha is charged with assessing her company's external environment as part of a SWOT analysis. Samantha will study her company's: A. strengths.

B. opportunities.

C. strengths and weaknesses.

D. weaknesses.

E. opportunities and threats.

34. Manufacturers who use just-in-time manufacturing systems coordinate closely with suppliers in order to ensure that materials and supplies arrive just before they are needed in the manufacturing process. While just-in-time systems can offer major advantages in terms of inventory costs, they must be carefully managed. If a firm found that its just-in-time system was badly managed, leading to frequent manufacturing delays due to missing parts, this would represent a _ in a SWOT analysis.

A. weakness B. opportunity C. threat D. strength E. business mission 35. For U.S. businesses with strong export capabilities, expansion of U.S. trade agreements with other countries creates: A. weaknesses.

B. opportunities.

C. strengths.

D. threats.

E. strategic plans.

36. In 2006, Ford Motor Company announced it would severely cut back automobile production. For parts companies supplying Ford Motor, this represented a(n): A. weakness.

B. opportunity.

C. strength.

D. threat.

E. strategic plan.

37. Lionel is asked to conduct an STP analysis for his firm. The first step he should perform in this analysis is to: A. develop a business mission statement.

B. choose the best target markets.

C. reposition existing segments.

D. divide the marketplace into subgroups.

E. conduct a SWOT analysis.

38. Recently, Walmart announced it would begin selling organic food products. In doing so, Walmart is probably trying to: A. gain government subsidies.

B. attract a different market segment.

C. reduce its costs.

D. save the environment.

E. offset cost-based pricing pressure.

39. For years, when considering new products, marketers at Celestial Seasonings asked themselves, "What would Stacy think?" Stacy was a fictional character representing 25-50 year old, educated, upper-income women who rarely watched television but did a lot of reading. "Stacy" represented Celestial's primary: A. demographic segment.

B. positioning.

C. SBU. D. target market segment.

E. sustainable competitive advantage.

40. Many of today's college graduates will make their livings providing goods and services to "baby boomers," the large group of Americans born in the period after World War II. Baby boomers are a _ market segment.

A. psychological B. behavioral C. social D. product-based E. demographic 41. After identifying various market segments that her company could pursue, Lisa evaluated each segment's attractiveness based on size, income, and accessibility. Lisa was involved in: A. target marketing.

B. situation analysis.

C. diversification.

D. positioning.

E. market penetration estimation.

42. LeBron James, Alex Rodriguez, and other athletes are paid huge sums of money by companies for celebrity endorsements. If, endorsements by these athletes create a clear understanding among consumers of the companies' products, they can help with the firm's _ strategy.

A. product excellence B. targeting C. positioning D. segmentation E. customer excellence 43.

involves the process of defining the marketing mix variables so that target customers have a clear, distinctive understanding of what a product does or represents in comparison with competing products.

A. Targeting B. Market segmentation C. A sustainable competitive advantage D. Positioning E. A customer excellence strategy

44. Imagine that you are in a gourmet food store choosing your favorite "comfort" food instead of being in a classroom taking this test. Notice the packaging, colors, labels, even the fonts used on labels.

All of these efforts are part of the marketer's: A. value-based promotions.

B. market segmentation.

C. positioning strategy.

D. customer excellence strategy.

E. target market.

45. When positioning products relative to competitors' offerings, firms typically are most successful when they focus on opportunities: A. that build on their strengths relative to those of their competitors.

B. for diversification.

C. in international markets.

D. where value-based pricing can be ignored.

E. where customer excellence can be substituted for product excellence.

46. Many small businesses whose competitors are national franchises advertise "we are locally owned" or "we have been here since 1951." This is part of these firms': A. business mission.

B. market segmentation strategy.

C. positioning strategy.

D. customer excellence strategy.

E. target market.

47. When discussing the marketing planning process, STP stands for: A. Strategies, tactics, and plans.

B. Strategize, target, and promote.

C. Segmentation, targeting, and positioning.

D. Situation analysis, trend spotting, and planning.

E. Sustaining, trending, and positioning.

48. Braddock University allows recent graduates to come back and take additional courses for free. By offering additional educational services, the university is enhancing its _ in an attempt to create value for its customers.

A. segmentation strategy B. place strategy C. locational excellence strategy D. diversification strategy E. product strategy 49. The idea of value-based marketing requires firms to charge a price that: A. covers costs and generates a modest profit.

B. includes the value of the effort the firm put into the product or service.

C. captures the value customers perceive that they are receiving.

D. prioritizes customer excellence above operational excellence.

E. matches competitors' prices.

50. E-books, in addition to being an alternative product form, provide _ _ value creation since they can be downloaded via the Internet immediately when they are needed.

A. product B. place C. promotion D. price E. primary

51. In value-based marketing, promotion communicates the: A. targeted solution.

B. operational excellence strategy.

C. value proposition.

D. relative market value.

E. target market definition.

52. Google and other search engines allow marketers to bid to have their ads shown when consumers search on keywords related to the firm's products. These marketers are attempting to create value through .

A. product B. price C. promotion D. place E. cost-based 53. In order to effectively communicate value to target markets, marketers must first: A. consider the cost of alternative media.

B. use the Internet.

C. redesign ads to meet media specifications.

D. understand their customers.

E. hire the right ad agency.

54. Craig sees that his company's quarterly sales and profits are significantly above projections and says, "That's great. Let's keep doing what we've been doing." Craig is ignoring the step of the marketing planning process.

A. Evaluate Performance B. Define the Business Mission C. Situation Analysis D. Implement Marketing Mix and Resources E. Identifying and Evaluating Opportunities 55. The first objective in the Evaluate Performance phase of the marketing planning process is to: A. determine whether to raise or lower prices.

B. adjust advertising allocations.

C. find ways to cut costs.

D. review implementation programs and results using metrics.

E. consider changing the target market.

56. Kathy reviews her division's quarterly results and sees that some units exceeded goals while others did not. Next, she will attempt to determine why performance of the different units varied, and whether the variation: A. created a net benefit or loss.

B. should be reported to senior executives or not.

C. was consistent with the company's mission statement.

D. offers opportunities for diversification.

E. was due to factors within or outside the firm's control.

57. Understanding the causes of performance, regardless of whether that performance exceeded, met, or fell below the firm's goals: A. enables firms to make appropriate adjustments.

B. allows managers to demonstrate their effectiveness.

C. offers insights into value-based pricing.

D. should be followed by eliminating underperforming SBUs. E. allows firms to better assess customer loyalty.

58. Laura is reviewing sales data after a recent in-store promotion of her company's diet products. The data show success in some stores and limited response in others. Laura will probably next review the company's: A. financial statements, to investigate current and past profits.

B. brand awareness study, to assess national levels of awareness.

C. implementation programs, to see if the promotion was handled consistently in the different stores.

D. results for other product lines, to see how important diet products are to the firm.

E. analysis of national diet trends, to predict future sales levels.

59. After conducting STP analysis for her custom auto parts store and developing strategies for each of the four Ps, Monique now has to make _ decisions.

A. competitive response B. resource allocation C. product line D. market growth E. mission statement

60. Lamar owns four dry cleaning stores in the suburbs of Orlando. He recently updated his STP analysis, and has just finished adjusting his marketing mix based on the STP results. His next strategic marketing decision will likely involve: A. how Disney World crowds will impact his business.

B. which employees to promote or fire.

C. how to allocate resources among his four stores.

D. what new government regulations might create opportunities or threats.

E. when to shift from a customer excellence to an operational excellence strategy.

61. In most companies, marketing resource allocation decisions are made at the SBU or level of the firm.

_

A. corporate B. product line C. customer care D. sales representative E. accounting 62. A(n) some way.

is a group of products that consumers may use together or perceive as similar in

A. SBU B. STP C. product line D. market segment E. promotional service 63. Heather has been assessing a number of her firm's products using the Boston Consulting Group approach to portfolio analysis. She has been trying to assess the strength in a particular market and is looking at the sales of the product and the overall market as well as the sales of competitors.

Heather is trying to determine: A. the product's relative market share.

B. the market growth rate.

C. a source of competitive advantage.

D. the impact of population shifts on future demand.

E. cash equivalent values for each product.

64. To determine how attractive a particular market is in using the BCG portfolio analysis, is established as one axis.

A. competitive intensity B. sales dollars C. market size D. market growth rate E. market profit potential 65. In BCG portfolio analysis, products in low-growth markets that have received heavy investment and now have excess funds available to support other products are called: A. stars.

B. cash cows.

C. question marks.

D. dogs.

E. anchors.

66. Fernando was thrilled to find out that his company had just decided to invest a great deal of money in the product he was managing. He knows that even with its recent high rate of growth and the fact that it dominates its market, he would need more money to establish it firmly. Using the BCG portfolio analysis, his product would be classified as a(n): A. star.

B. cash cow.

C. question mark.

D. dog.

E. anchor.

67. Using the BCG portfolio analysis, a "dog" should be phased out unless: A. its marketing manager is a champion of the product.

B. additional resources could increase its relative market share slightly.

C. it complements or boosts the sales of another product.

D. the market has a small chance of rebounding.

E. None of the above. Dogs should be phased out.

68. The strategic marketing planning process: A. is a five-step process that should always be completed in order.

B. is frequently used in reverse.

C. begins with establishing specific, measurable outcomes.

D. is not always sequential.

E. forces marketing managers to think rationally.

69. Which of the following is NOT one of the four major growth strategies marketers typically utilize?

A. market penetration B. market development C. segment development D. diversification E. product development 70. For many years, because of the size of the U.S. economy, domestic companies ignored international markets, preferring instead to develop new product offerings for existing customers.

These companies were pursuing a ________________ strategy.

A. market penetration B. market development C. segment development D. diversification E. product development 71. Adrienne decides to add new sales representatives and increase advertising in her existing market for her current line of security systems. Adrienne is pursuing a __________ growth strategy.

A. segment development B. market development C. market penetration D. diversification E. product development 72. Sarah has decided to pursue a market penetration strategy for her French cookware product line.

She will likely increase advertising and sales promotion. She may also consider: A. getting the stores who carry her products to promote them more heavily.

B. investing in a travel agency.

C. shifting resources into a new line of European-styled footwear.

D. expand into new geographic regions.

E. offering French cooking classes.

73. A

_ growth strategy employs the existing marketing offering to reach new market segments.

A. product proliferation B. market development C. market penetration D. diversification E. product development 74. Quitman sells his business language dictionary to college students throughout the United States.

He wants to start selling the book to international students abroad. Quitman wants to pursue a growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development 75. When pursuing a market development strategy, expanding into international markets is generally: A. more risky than expansion in domestic markets.

B. impossible due to negative attitudes about American products.

C. executed with the help of international trade subsidies.

D. simplified by creating new products for export markets.

E. the only option offering substantial opportunities for growth.

76. H&R is a small, local heating and air conditioning business. The area military base is a potential source of growth, and H&R already installs and services the type of equipment the military would require, but it is difficult to get established as a certified government contractor. H&R is considering a _ growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development

77. Many states create licensing requirements for a variety of professionals (such as lawyers and accountants) designed to restrict entry into their market by professionals from other states. This strategy limits growth strategies.

A. product proliferation B. market development C. market penetration D. diversification E. product development 78. Marketers who design and offer new products and services to their existing customers are pursuing a _ growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development 79. Most banks now have customer relationship software which, when a customer contacts the bank, tells the service representative what types of accounts, loans, and credit cards the customer currently has. Service representatives use this information to sell some of the other services the bank currently offers to these customers. This is a _ growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development 80. Maryam called her auto insurance agent to renew her policy. The agent told her about new types of insurance that are now available--to cover her apartment, or even the engagement ring she just got from her fiancé. The agent was pursuing a _ growth strategy.

A. product development B. market development C. market penetration D. diversification E. product proliferation

81. Introducing newly developed products or services to a market segment the company is not currently serving is called: A. product development B. market development C. market penetration D. diversification E. product proliferation 82. As discussed in the chapter opening, Dunkin' Donuts, Starbucks, and McDonald's have all found ways to succeed in the branded coffee market. How have they managed to do this?

A. They use higher-quality ingredients than do other firms.

B. Each of the firms employs marketing strategies that take advantage of the firm's unique strengths.

C. They avoid opening stores near competitors' locations.

D. They have agreed to divide the coffee market between them, and thus can avoid competing with each other.

E. They have competed in the coffee market for so long that their success is guaranteed.

83. Zara is a women's clothing retailer headquartered in Spain, with stores located in many countries.

Zara has developed a "quick response" system that allows store merchandise to be adjusted rapidly to fit changing customer preferences. Every aspect of Zara's operation is optimized for this system, making it difficult for competitors like The Gap to duplicate. Zara has established: A. customer loyalty.

B. locational excellence.

C. a diversification growth strategy.

D. a sustainable competitive advantage.

E. a related diversification opportunity.

84. Fourteenth National Bank prides itself on offering better service than any of its competitors. If this is accurate, and if customers recognize and value Fourteenth National's superior service, the bank creates and delivers value through: A. promotional excellence.

B. product excellence.

C. operational excellence.

D. global excellence.

E. customer excellence.

85. Anita has gone to the same hair salon for the past ten years. She believes that her stylist, the salon owner, does a better job of cutting and styling her hair than anyone else could. Other salons have opened closer to Anita's home, some offering more plush facilities or lower prices, but she isn't tempted to switch. Anita's attitude toward the salon is an example of: A. a sustainable competitive advantage.

B. a customer retention program.

C. an opportunity, in SWOT analysis.

D. customer loyalty.

E. the benefits of a locational excellence strategy.

86. Customer retention programs are based on what concept?

A. Customer excellence is the easiest macro strategy to follow.

B. Customer relationships should be viewed from a lifetime value perspective.

C. It is important to maximize profits in the first few months of a customer relationship.

D. Segmentation, targeting, and positioning analysis should not be rushed.

E. Firms must spend large amounts of money to retain customers.

87. Most banks implement customer retention programs aimed at their best customers. They do this because they know that retaining customers usually results in: A. a product development growth strategy.

B. an operational advantage.

C. opportunities for diversification.

D. increased long term profits.

E. more clearly defined market segments.

88. Some universities offer online degree programs, competing with traditional colleges based on the convenience of taking online courses. These online programs are pursuing which macro strategy?

A. Customer excellence B. Locational excellence C. Operational excellence D. Product excellence E. None of these

89. When a pharmaceutical company develops a new medication, it typically applies for a patent in order to prevent competitors from developing copycat products for several years. Pharmaceutical companies apply for patents in order to establish: A. an operational excellence macro strategy.

B. a market penetration growth strategy.

C. a sustainable competitive advantage.

D. an efficient supply chain.

E. all of these.

90. One example of a customer loyalty program is: A. a "frequent diner" card at a restaurant, offering a free appetizer for every $100 in food purchases.

B. a quantity discount offered for large purchases at an office supply store.

C. all of these.

D. an "everyday low price" policy on all products at a grocery store.

E. an extensive customer service training program for new employees at a hair salon.

91. Excellence in human resource management is an element of which of the macro strategies?

A. Customer excellence B. Employer excellence C. Locational excellence D. Operational excellence E. Product excellence 92. Which of the following is the third step in the strategic marketing planning process?

A. Define the business mission.

B. Identify and evaluate opportunities.

C. None of these.

D. Implement marketing mix and allocate resources.

E. Situation analysis.

93. In mid-2010, Hewlett-Packard Company (HP) acquired Palm Computing, Inc., a manufacturer of personal devices and smart phones. Before deciding to acquire the company, strategic planners at HP spent time thinking about how Palm and HP would "fit" together, and how the acquisition might change HP's core goals and objectives. The strategic planners were engaged in the _ step of the strategic marketing planning process.

A. Situation analysis B. Implement marketing mix and allocate resources C. Identify and evaluate opportunities D. Evaluate performance E. Define the business mission 94. After defining the business mission, what should a firm do next to develop a marketing plan?

A. Conduct an STP analysis.

B. Perform a situation analysis.

C. Develop a positioning strategy.

D. Select a target market.

E. Implement the four Ps. 95. In a SWOT analysis, increasing gasoline prices would represent a potential __ manufacturers of electric cars.

for

A. weakness B. threat C. opportunity D. operational advantage E. locational advantage 96. An advertising campaign for Geico Insurance uses the slogan, "So easy, even a caveman could do it" to emphasize the ease of buying insurance on Geico's website. This campaign is part of Geico's: A. mission statement.

B. market segmentation plan.

C. product strategy.

D. customer excellence strategy.

E. positioning strategy.

97. Abercrombie & Fitch, a hip clothing retailer, includes a "Share it!" button on its website. This button encourages an Abercrombie customer to post a link to a product page (perhaps showing a new style of jeans) on Facebook or Twitter. Abercrombie & Fitch hopes that the customer's friends (who are probably very much like current customers) will click the link, visit the page, and make purchases. This is an example of a growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development 98. Sodexho is a corporation that manages school cafeterias, university dining halls, mess halls at military bases, concession stands at sports arenas, and other large-scale food service facilities. If Sodexho were to begin to sell individual frozen meals in supermarkets, it would be pursuing a _ growth strategy.

A. product development B. market development C. market penetration D. diversification E. product proliferation 99. The Apple iPad is the market leader in the new--and fast-growing--tablet computer market. Based on BCG portfolio analysis, how should Apple handle allocating resources to the iPad? A. Apple will not need to invest much; instead, the iPad can generate funds to support other product lines.

B. Apple should watch the situation but not invest much yet, since the future of the market is uncertain.

C. Apple should be prepared to invest heavily to help the iPad to achieve its maximum potential in the market.

D. Apple should not invest in this market until it has more competitors.

E. Portfolio analysis doesn't offer any advice about resource allocation.

100.3 M involves its customers in the process of developing new products. In this way, it can benefit from

current customers' insights and develop new products that will meet these customers' needs. 3M is pursuing a growth strategy.

A. Diversification B. Market development C. Market penetration D. Product development E. Product penetration 101. Over the last few months, Juan and his colleagues have analyzed the current business situation,

and then identified target markets for his firm's personal care products. Finally, they developed the products, prices, distribution and promotion that should appeal to each of those target markets. In doing so, Juan has also identified what he believes is an advantage his competitors cannot match.

Juan and his colleagues have been developing: A. a business mission statement B. a strategic vision C. team-building exercises D. a marketing strategy E. competitive assessments 102. Gerald's Tire Store sets itself apart from competitors by the extra attention it pays to providing fast,

courteous service in a clean, professional looking environment. Gerald's has used this strategy for over 40 years, expanding to 15 outlets. Gerald's Tire Store has created a _ _ to create and deliver value and to develop a sustainable competitive advantage.

A. segmentation strategy B. set of metrics C. market development strategy D. diversification strategy E. macro, or overarching, strategy 103. Which of the following is the best way to build a sustainable competitive advantage using product

excellence?

A. Being the first to offer customers desired features, even if competitors can copy them easily.

B. Positioning the product using a clear, distinctive brand image.

C. Having the most features on each model.

D. Focusing on being cutting edge and continually eliminating older features that are still in use by customers.

E. Copying the market leader's features, but at a lower cost.

104. A competitive advantage based on location is often sustainable because:

A. mobile marketing has not yet proven its value for most customers.

B. real estate prices have been dropping.

C. few marketers are aware of its importance yet.

D. it is not easily duplicated.

E. the internet has diminished the importance of "brick and mortar" stores.

105. Four companies dominate the cereal industry. These firms produce in large volumes, promote

heavily, and control access to the supermarket shelves through "slotting allowances," which are payments to retailers in return for shelf space. Combined, these four firms have: A. identical marketing mixes.

B. all of these.

C. a sustainable competitive advantage.

D. achieved product excellence.

E. violated laws governing competition.

106. Value creation through Place decisions for a consumer product involves:

A. putting the product in the front of the store.

B. designing creative displays to capture consumers' attention.

C. pricing products differently at different stores.

D. making sure the product is available in the stores where customers will want to find it, and that it is always in stock so they can buy it when they want to.

E. focusing exclusively on internet sales to reduce supply chain costs.

107. In recent years, cellular (mobile) service providers have worked hard to eliminate "dead zones,"

providing customers with service wherever they traveled. By working to make the network available in more locations, cellular service companies were focusing on _ value creation.

A. product B. price C. promotion D. place E. financial

108. When firms successfully implement poor strategies (perhaps due to good luck) or do a poor job of

implementing good strategies, it can be difficult to: A. generate cost-based performance ratios.

B. evaluate performance and make adjustments.

C. increase product excellence without reducing customer excellence.

D. develop segmentation strategies.

E. choose a business mission.

109. In 2007, Apple Computer Company introduced its new iPhone, adding a cellular telephone, a

camera, and Internet access to its iPod. The company was pursuing a(n)

_

strategy.

A. market development B. market penetration C. operational excellence D. customer excellence E. product development 110. The goal of a customer excellence strategy is to gain loyal customers. Customer loyalty can be

developed through: A. having a strong brand B. offering unique merchandise C. providing superior customer service D. all of these E. none of these 111. Allen is in the marketing department of a mid-sized firm that develops and sells communications

systems. He is proud of the Human Resources area in the company that provides the firm with excellent employees. Allen himself really enjoys his work, but he knows the work of HR helps create an advantage for the firm because: A. customers appreciate the kind of service that knowledgeable employees provide.

B. employees play a major role in the success of the firm.

C. it is easier to communicate with and inspire the customer if the employees believe in what the firm is doing.

D. building customer loyalty depends on a committed workforce.

E. All of these.

112. In its Campaign for Real Beauty, Dove was able to connect with important parts of its customer

base by: A. creating high impact campaigns at a lower cost.

B. expanding beyond traditional constraints of advertising.

C. connecting directly with customers via the internet.

D. All of these E. None of these 113. After performing an STP analysis, marketers implement

_ for each target market.

A. pricing strategies B. promotion strategies C. place strategies D. product strategies E. all of these 114. Brad is reviewing the performance of his franchise sandwich store. As a franchisee, he has access

to comparative data from other stores. Brad will likely look at help him to evaluate his performance.

data for other stores to

A. sales B. gross margin C. number of customers D. coupon redemption E. all of above 115. Portfolio analysis is a useful and powerful tool, but firms often need to take a more balanced

approach because: A. measures are difficult to obtain and project.

B. classifications can become self-fulfilling prophecies and strengths and weaknesses are distorted.

C. substitute approaches can offer different insights.

D. All of these.

E. None of these.

116. Starbucks has developed a number of metrics beyond purely financial metrics. Knowing the

importance of perceptions and knowing the importance of developing ways to demonstrate its activity, Starbucks tries to find clear ways to: A. build brand equity.

B. demonstrate its sense of corporate social responsibility.

C. address concerns of opponents at local, regional, national and global levels.

D. help consumers to feel better about their purchases.

E. All of these 117. Greta is the marketing director for the Pump-N-Slurp convenience store chain. She recently

developed a marketing plan for the firm and presented it to company executives. Which of the following did Greta probably include in Pump-N-Slurp's marketing plan?

A. Specific plans for each of the four Ps. B. Marketing objectives.

C. Opportunities for the firm.

D. Perceived weaknesses of the firm.

E. All of these.

118. Marketers want their firms to develop efficient operations because this kind of efficiency:

A. usually leads to lower prices or greater pricing flexibility.

B. allows the firm to offer greater value to customers.

C. makes it easier to get the products customers want to them when they want them.

D. can lead to more attractive margins.

E. All of these

Essay Questions 119. Of what use is a sustainable competitive advantage to a firm?

120. The text states, "Viewing customers with a lifetime value perspective, rather than on a transaction-

by-transaction basis, is the key to modern customer retention programs." Create an example demonstrating a lifetime value perspective. Why is customer retention almost always a profitable marketing strategy?

121. Although most people do not have a personal marketing plan, when would one be appropriate?

122. One of the benefits of taking marketing courses is the opportunity to apply marketing concepts to

marketing yourself. When selling yourself, you are a product including all the skills, aptitudes, and attitudes you bring to the market. What is a sustainable competitive advantage? What can you do to give yourself a sustainable competitive advantage in the marketplace?

123. Your marketing professor, Dr. Marketing, has been asked to participate in the university's strategic

marketing planning process. During the planning phase of the process, what questions will Dr. Marketing likely ask? Be specific to the university's strategic marketing planning process.

124. The text describes firms like Netflix and Southwest, who operate in competitive markets but

successfully differentiate themselves from the competition. This gives them a sustainable competitive advantage. What is a sustainable competitive advantage? Describe an example of a product or business you have encountered that has developed sustainable competitive advantage.

Why is that product or firm advantage sustainable?

125. Your marketing professor, Dr. Marketing, has been asked to participate in the university's strategic

marketing planning process. After completing the planning phase of the process, Dr. Marketing has been asked to assist with the STP analysis. What questions will Dr. Marketing ask during the STP analysis? Be specific to the university's strategic marketing planning process.

126. As the text states, "Firms typically are most successful when they focus on opportunities that build

on their strengths relative to those of their competition." Using the automobile industry in the United States, describe an example of this type of positioning strategy.

127. Your marketing professor, Dr. Marketing, has been asked to participate in the university's strategic

marketing planning process. After completing the first three steps of the process, Dr. Marketing has been asked to assist with implementing the marketing mix and allocating resources. What questions will Dr. Marketing ask? Be specific to the university's strategic marketing planning process.

128. Jamie, a sales manager for an industrial materials company, reviews each sales representative's

performance quarterly. She knows business has been good but is surprised to see some reps are selling much more than their goals while others have not meeting their goals. What should Jamie do?

129. You and your friend Alison work in different parts of a large firm. In a recent analysis, your area was

labeled a "cash cow" and hers was labeled a "question mark." What things would you do differently in your area than Alison would do in hers?

130. Boston Consulting Group's Portfolio Analysis classifies a company's products or product lines into

a two-by-two matrix. What are the bases of classification and what are the products or product lines in each of the four quadrants called? What marketing strategies are usually considered for each of the four classifications?

131. Your new sales manager, who previously worked for Boston Consulting Group, directs each sales

rep to "toss out the dogs," "exploit the stars," and "milk the cows." Translate this into everyday English: what is the sales manager asking the sales reps to do?

132. After finishing his marketing degree, Ryan inherited the family shrimp shack restaurant. The

restaurant is a small, local institution that beach visitors have been coming to for decades. Ryan wants to make his business grow and is considering either a market penetration or market development strategy. Describe what Ryan will likely do if he pursues either strategy.

133. Garden Gate is a one-location nursery business, selling plants and flowers for home gardeners.

The new owners want to grow through either a product development or diversification strategy.

What will the owners likely do if they pursue either strategy?

134. Why is a good marketing strategy necessary for a firm?

135. Why is it important to have a structured approach to planning and developing a marketing plan?

136. Southwest Airlines is known for being the low-cost provider in the U.S. airline industry. What type of

macro strategy has Southwest pursued?

137. What is the goal of product, operational, locational, and customer excellence?

138. Every summer, university administrators attempt to estimate how many students will show up in the

fall. When August arrives, they hire part-time instructors and reassign faculty to teach the courses students want. In the spring, administrators often go on a retreat to consider how to do things differently next year. What phase of the strategic planning process do they engage in during each of the three seasons (summer, fall, and spring)?

139. Firms periodically conduct SWOT analyses. Why?

140. When using STP, what types of opportunities provide the greatest potential success?

141. When catalog companies send sale catalogs to their current customers, which type of growth

strategy are they pursuing?

142. When musicians and their concert promoters began offering CDs of a live concert, immediately

after the concert ended, what type of growth strategy were they pursuing?

143. Several years ago, the Florida Orange Juice Growers Association ran a promotional campaign with

the slogan: "Orange juice. It isn't just for breakfast anymore." Based on this slogan, which of the four growth strategies was the association pursuing? Briefly explain your reasoning.

144. Suppose that you and a friend decide to turn your favorite sports activity--inline skating--into a

business. You plan to design a line of fashionable clothing that integrates elbow and kneepads. For each of the four macro strategies, briefly describe the most important thing your company should do if you intend to focus on that strategy. Your answers should be specific to the inline skating business.

145. Conduct a brief SWOT analysis of your prospects of finding a good job related to your major when

you graduate (if you already have such a job, think about finding a job with more responsibility). Be sure to include at least one factor representing each of the four major sections of a SWOT analysis, and be sure to label each factor to indicate which of those four sections it belongs in.

146. In July, 2010, Microsoft discontinued the Kin, its social networking phone, after just six weeks of

disappointing sales. During what step of the strategic marketing planning process would Microsoft have made the decision to stop offering the product?

147. Suppose that you and a friend decide to turn your favorite sports activity--inline skating--into a

business. You plan to design a line of fashionable clothing that integrates elbow and knee pads. In launching your business, you complete all the activities listed below (though not necessarily in this order). For each listed activity, identify the step in the strategic marketing planning process it represents. a. You track sales and profits, and discover that pants are selling better than shirts, apparently because the shirts are too expensive. You will look for a lower-cost supplier for shirts, or consider dropping your prices if you can afford to do so. b. You realize that your experience as skaters is a plus; however, your lack of experience in selling clothing could hurt you. You find out that a skateboard shop in town wants to branch out into inline skating; however, you also find out that Nike is thinking about expanding its product line to include special inline skating clothes. c. You decide that you will target college students who enjoy inline skating, and will aim to establish yourself as a company that offers trendy clothes for the student budget. d. You decide that your business focus will be to offer fashionable yet durable clothing for inline skaters, with built-in protection for knees and elbows. e. You offer clothing that college students would want to wear, price it for a student budget, sell it online and in sports stores near college campuses, and promote your products on Facebook.

Chapter 02 Developing Marketing Strategies and a Marketing Plan Answer Key

True / False Questions 1. (p. 29)

Strong supplier relations and efficient supply chains help firms such as Walmart to achieve operational excellence.

TRUE Efficiency in the supply chain is one of the primary features of an operational excellence strategy.

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

2. (p. 31)

To build a sustainable competitive advantage, companies should focus on a single strategy.

FALSE While a firm may put primary energy into one strategy in order to achieve excellence, many firms seek multiple sources of advantage in order to meet customers needs to the greatest possible extent.

AACSB: Analytic Blooms: Remember Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

3. (p. 32)

It is not always necessary to go through all the steps in the marketing planning process.

TRUE Revisions to existing plans often do not require going through all steps in the process.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

4. (p. 32)

A mission statement describes the specific actions a firm will take to achieve its goals.

FALSE A mission statement is a broad description of a firm's objectives and the scope of activities it plans to undertake.

AACSB: Analytic Blooms: Remember Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

5. (p. 27)

iTunes software is often credited for the success of the Apple iPod MP3 player, because it made the iPod easier to use than competing players, and was difficult for competitors to duplicate. This is an example of a sustainable competitive advantage.

TRUE iTunes made the iPod so easy to use that it was difficult for other MP3 players to compete, even at lower prices. Over time, some competitors have created similar tools, but it has been difficult enough to copy that these competitors have never really caught up.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

6. (p. 35)

STP refers to segmentation, testing, and promotion.

FALSE STP stands for "segmentation, targeting, and positioning."

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

7. (p. 33)

The components of a SWOT analysis are Strengths, Weaknesses, Opportunities and Tactics.

FALSE The components of a SWOT analysis are Strengths, Weaknesses, Opportunities, and Threats.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

8. (p. 36)

Firms are typically more successful when they focus on opportunities that build on their competitors' strengths.

FALSE Firms are typically more successful when they focus on opportunities that build on their own strengths relative to the competition.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

9. (p. 34)

Duke's is a surfer-themed restaurant chain in Hawaii. Most of its customers are tourists. In a SWOT analysis for Duke's, the possibility that the recession might cut back on tourism in Hawaii would be considered a Weakness.

FALSE A recession is an external factor with possible negative results, so it is a Threat.

AACSB: Analytic Blooms: Understand Difficulty: 3 Hard Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

10. (p. 38)

Price should be based on the value that the customer perceives.

TRUE Value-based pricing helps to ensure that customers perceive a product as a good value.

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

11. (p. 41)

Geraldo manages the electrical turbine engine division of General Electric Corporation. He makes most decisions independently, without consulting headquarters. Geraldo manages a strategic business unit.

TRUE A strategic business unit is a division of the firm that can be managed and operated somewhat independently from other divisions.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

12. (p. 43)

The marketing planning process always proceeds sequentially through the five steps.

FALSE Planning processes can move back and forth between the steps as needed.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

13. (p. 45)

Isaac is looking for ways to offer new goods and services to his existing customers. He is pursuing a market development strategy.

FALSE This is a product development strategy. A market development strategy offers existing products and services to new customers.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

14. (p. 46)

If Starbucks decided to start selling organic meals to corporate eating facilities, it would be pursuing a diversification strategy.

TRUE Because this represents new products to new customers, it is an example of diversification.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

15. (p. 43)

Sandisk's MP3 player product line (called the Sansa) has a low relative market share. The MP3 player market is expected to decline over the next few years. In BCG portfolio analysis, the Sansa would be considered a dog.

TRUE The Sansa has low relative market share in a low-growth market, which is the definition of a dog.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

16. (p. 32)

The "Implement Marketing Mix" step of the strategic marketing planning process is part of the control phase.

FALSE It is part of the Implementation phase, along with STP analysis.

AACSB: Analytic Blooms: Remember Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

Multiple Choice Questions 17.

If a firm wants to develop a sustainable competitive advantage, it should:

(p. 27)

A. begin an aggressive campaign to buy up competitors.

B. copy the innovative features of other firms that are attractive to customers.

C. examine its operations and customer relations to identify significant things competitors cannot easily copy.

D. increase its marketing budget so that it outspends its competitors.

E. arrange to meet with competitors to discuss how to avoid direct competition.

A sustainable competitive advantage comes from doing things that add value and that are not easily imitated by competitors. The other options do not achieve this objective.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

18. (p. 28)

Which of the following is NOT one of the four overarching strategies to create and deliver value and to develop sustainable competitive advantage?

A. Locational excellence B. Customer excellence C. Operational excellence D. Product excellence E. Planning excellence The four overarching strategies are locational excellence, customer excellence, operational excellence, and product excellence.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

19. (p. 28)

When Ramona, the keynote speaker at a major business leaders' conference, arrived in the middle of the night at the Ritz-Carlton, she was exhausted and her suit was wrinkled from her ten-hour plane trip. The night clerk found someone to dry clean Ramona's suit and have it ready for her morning presentation. She has been a loyal Ritz-Carlton customer ever since. In this example, Ritz-Carlton demonstrated the macro strategy of: A. customer excellence B. operational excellence C. product excellence D. promotional excellence E. global excellence The Ritz-Carlton clerk went to extra trouble to offer excellent customer service, which is one way to pursue a customer excellence strategy.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

20.

Taking steps to encourage customer loyalty is one way to:

(p. 28)

A. test new products.

B. promote efficiency.

C. sustain an advantage over competitors.

D. develop new pricing strategies.

E. improve supply chain effectiveness.

A customer excellence macro strategy, which is one way to pursue a sustainable competitive advantage, depends in part on encouraging customer loyalty.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

21. (p. 28)

Some banks have begun offering special accounts designed to attract junior high school students. These kids save in such small amounts that the accounts cost banks more to maintain than they are worth. But bankers know that consumers are creatures of habit and hope that the young people they serve now will become adult customers. These banks recognize: A. that operational excellence is an important macro strategy.

B. the lifetime value of customers.

C. that product excellence leads to loyal customers.

D. the importance of making decisions based on short-term results.

E. that as long as customers bring in some revenue, costs do not matter.

By spending money now in the hope of receiving revenues later, banks are recognizing that the lifetime value of a customer relationship must be considered when choosing target markets. This does not mean that costs don't matter at all, but it means that a relationship that is initially unprofitable may become profitable as it continues.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

22. (p. 28)

Narbonne's, an upscale department store, instructs sales personnel that whenever a customer asks where something is, they should drop what they are doing and offer to escort the customer to what they are looking for. The company's reputation for excellent customer service has probably resulted in: A. product design excellence.

B. mission statement satisfaction.

C. sustainable price decreases.

D. a sustainable competitive advantage.

E. producer excellence.

This is a good example of a potential sustainable competitive advantage based on customer service (i.e., a customer excellence strategy).

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

23. (p. 29)

Firms achieve management.

_ through efficient procedures and excellent supply chain

A. customer excellence B. locational excellence C. customer loyalty D. value-based pricing E. operational excellence An operational excellence strategy depends on efficiency throughout the supply chain in order to keep costs low.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

24. (p. 29)

Marketers want their firms to develop excellent supply chain management and strong supplier relations so they can: A. persuade stores to refuse to carry competitors' products.

B. use their power within the supply chain to force weaker firms to accept less favorable pricing.

C. control prices and lock in margins.

D. create a sustainable competitive advantage.

E. justify charging higher prices than competitors do.

Some of the potential answers here represent unethical (and potentially illegal) behavior. The best answer is far simpler--this type of operational excellence helps to create a sustainable competitive advantage by keeping costs low.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

25. (p. 31)

For many years, Southwest Airlines distinguished itself as the low-cost airline. Now, many other low-cost competitors have entered the market. Similarly, Southwest was one of the first airlines to offer online ticketing. Now, all airlines have online ticketing. These examples suggest that: A. no single strategy is likely to be sufficient to build a sustainable competitive advantage.

B. situation analysis is a continuous process.

C. customers rarely remain loyal to companies.

D. product excellence is the only true source of a sustainable competitive advantage.

E. innovation is pointless because competitors will develop copycat offerings.

The example shows that competitors strive to copy good ideas. But that doesn't mean innovation is pointless--being the first to do something can still give you an advantage if you do it best, or if you innovate in ways that are difficult to imitate. What this example shows is that you cannot come up with a single idea, stay with it long term, and expect to sustain a competitive advantage.

You must always look for new sources of advantage.

AACSB: Analytic Blooms: Analyze Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

26.

"Effective marketing doesn't just happen." It is:

(p. 31)

A. promoted through STP analysis.

B. possible only for seasoned marketing executives to achieve.

C. planned.

D. introduced through control phase SBUs. E. the result of competitor's failures.

Companies may sometimes succeed by accident, but good marketing requires careful planning.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

27. (p. 37)

Carla has been directed by her regional marketing manager to cut prices on seasonal items, submit an ad in the local paper, and tell distributors to reduce deliveries for the next month.

Which step of the strategic marketing planning process is Carla engaged in?

A. evaluate performance B. define the business mission.

C. situation analysis D. implement marketing mix and resources.

E. identifying and evaluating opportunities.

Carla is dealing with implementation of the marketing mix--price cuts (Price), advertising (Promotion), and distribution changes (Place).

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

28. (p. 32)

When conducting a SWOT analysis, in what phase of the strategic marketing process is an organization presently engaged?

A. planning B. implementation C. control D. segmentation E. metrics SWOT analysis is part of the Planning phase.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

29. (p. 28)

The automobile manufacturing industry closely watches annual consumer satisfaction surveys.

For years, Japanese car companies consistently had the highest levels of customer satisfaction, creating a _ for these companies.

A. strategic marketing plan B. clear mission statement C. cost advantage D. sustainable competitive advantage E. diversification strategy Satisfied customers, if this satisfaction leads to loyalty, is a source of sustainable competitive advantage.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

30.

Which of the following is LEAST likely to provide a sustainable competitive advantage?

(p. 27)

A. Lowering prices.

B. Having a well-known brand name.

C. Achieving high levels of customer satisfaction.

D. Using patented technology.

E. Creating an efficient supply chain.

Simply cutting prices is probably the easiest strategic move for a competitor to copy. In contrast, creating an efficient supply chain that lowers your costs, allowing you to pass those savings on to customers in the form of price cuts, can create a sustainable competitive advantage.

AACSB: Analytic Blooms: Understand Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

31. (p. 27)

Even when large discount retailers enter a market, a few small, local retailers survive and prosper. These small retailers have probably developed a(n) _ that allows them to survive.

A. advertising campaign B. plan to evaluate results C. sustainable competitive advantage D. set of performance metrics E. SWOT analysis The other items listed could help the retailers to develop or evaluate a plan to achieve a sustainable competitive advantage, but on their own they will not be enough. Small retailers usually cannot compete with larger competitors on price. But they might survive by offering services their customers value (and are willing to pay extra to get), by offering specialty products not carried by larger retailers, or by locating in places where the larger stores don't want to (or can't) locate.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

32. (p. 34)

As part of her company's SWOT analysis, Valerie is assessing the company's internal environment, including: A. strengths.

B. opportunities.

C. strengths and weaknesses.

D. threats.

E. opportunities and threats.

The internal components of a SWOT analysis are strengths and weaknesses.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

33. (p. 34)

Samantha is charged with assessing her company's external environment as part of a SWOT analysis. Samantha will study her company's: A. strengths.

B. opportunities.

C. strengths and weaknesses.

D. weaknesses.

E. opportunities and threats.

The external components of a SWOT analysis are opportunities and threats.

AACSB: Analytic Blooms: Remember Difficulty: 2 Medium Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

34. (p. 34)

Manufacturers who use just-in-time manufacturing systems coordinate closely with suppliers in order to ensure that materials and supplies arrive just before they are needed in the manufacturing process. While just-in-time systems can offer major advantages in terms of inventory costs, they must be carefully managed. If a firm found that its just-in-time system was badly managed, leading to frequent manufacturing delays due to missing parts, this would represent a in a SWOT analysis.

A. weakness B. opportunity C. threat D. strength E. business mission The management of the just-in-time system is an internal issue; if it is being done badly, that makes it a weakness.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

35. (p. 34)

For U.S. businesses with strong export capabilities, expansion of U.S. trade agreements with other countries creates: A. weaknesses.

B. opportunities.

C. strengths.

D. threats.

E. strategic plans.

Expansion of trade agreements is an external factor that could be favorable for firms that can take advantage. An external positive factor is an opportunity.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

36. (p. 34)

In 2006, Ford Motor Company announced it would severely cut back automobile production. For parts companies supplying Ford Motor, this represented a(n): A. weakness.

B. opportunity.

C. strength.

D. threat.

E. strategic plan.

For parts companies, Ford's actions represent external factors. A possible cutback in orders is a negative factor. An external negative factor is a threat.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

37. (p. 35)

Lionel is asked to conduct an STP analysis for his firm. The first step he should perform in this analysis is to: A. develop a business mission statement.

B. choose the best target markets.

C. reposition existing segments.

D. divide the marketplace into subgroups.

E. conduct a SWOT analysis.

The first stage of an STP analysis is segmentation, which involves dividing the market into groups. Business mission development and SWOT analysis take place before STP analysis starts, and targeting and positioning are later stages in STP analysis.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

38. (p. 35)

Recently, Walmart announced it would begin selling organic food products. In doing so, Walmart is probably trying to: A. gain government subsidies.

B. attract a different market segment.

C. reduce its costs.

D. save the environment.

E. offset cost-based pricing pressure.

Walmart is probably trying to attract customers who don't shop there now because they want to buy organic products. These customers represent a different market segment for Walmart.

AACSB: Analytic Blooms: Understand Difficulty: 3 Hard Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

39. (p. 36)

For years, when considering new products, marketers at Celestial Seasonings asked themselves, "What would Stacy think?" Stacy was a fictional character representing 25-50 year old, educated, upper-income women who rarely watched television but did a lot of reading.

"Stacy" represented Celestial's primary: A. demographic segment.

B. positioning.

C. SBU. D. target market segment.

E. sustainable competitive advantage.

Stacy was created to help Celestial's marketers to understand its major target market segment.

The segment is more than just demographic--it includes elements of Stacy's behavior (reading instead of TV). Stacy isn't Celestial's positioning--rather, the company needs to position its products to help women like Stacy to understand the value Celestial products can offer them.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

40. (p. 35)

Many of today's college graduates will make their livings providing goods and services to "baby boomers," the large group of Americans born in the period after World War II. Baby boomers are a _ market segment.

A. psychological B. behavioral C. social D. product-based E. demographic This segment is being formed using age, a demographic factor.

AACSB: Analytic Blooms: Understand Difficulty: 3 Hard Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

41. (p. 36)

After identifying various market segments that her company could pursue, Lisa evaluated each segment's attractiveness based on size, income, and accessibility. Lisa was involved in: A. target marketing.

B. situation analysis.

C. diversification.

D. positioning.

E. market penetration estimation.

A key component of target marketing is the evaluation of potential target segments' attractiveness.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

42. (p. 36)

LeBron James, Alex Rodriguez, and other athletes are paid huge sums of money by companies for celebrity endorsements. If, endorsements by these athletes create a clear understanding among consumers of the companies' products, they can help with the firm's strategy.

A. product excellence B. targeting C. positioning D. segmentation E. customer excellence Positioning is the creation of a clear, distinct understanding of what the product does or represents compared to competitors. Celebrity endorsers are often used to convey this message.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

43. (p. 36)

involves the process of defining the marketing mix variables so that target customers have a clear, distinctive understanding of what a product does or represents in comparison with competing products.

A. Targeting B. Market segmentation C. A sustainable competitive advantage D. Positioning E. A customer excellence strategy This is the definition of positioning, which is the final activity in STP analysis.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

44. (p. 36)

Imagine that you are in a gourmet food store choosing your favorite "comfort" food instead of being in a classroom taking this test. Notice the packaging, colors, labels, even the fonts used on labels. All of these efforts are part of the marketer's: A. value-based promotions.

B. market segmentation.

C. positioning strategy.

D. customer excellence strategy.

E. target market.

Packaging, colors, labels, and fonts all contribute to the consumer's impressions of a product and to their understanding of what it offers. This is therefore part of the product's positioning.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

45. (p. 36)

When positioning products relative to competitors' offerings, firms typically are most successful when they focus on opportunities: A. that build on their strengths relative to those of their competitors.

B. for diversification.

C. in international markets.

D. where value-based pricing can be ignored.

E. where customer excellence can be substituted for product excellence.

When firms take advantage of their strengths to develop positioning, they stand a good chance of success as long as these strengths translate into greater value for consumers.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

46. (p. 36)

Many small businesses whose competitors are national franchises advertise "we are locally owned" or "we have been here since 1951." This is part of these firms': A. business mission.

B. market segmentation strategy.

C. positioning strategy.

D. customer excellence strategy.

E. target market.

These firms are positioning themselves against the competition, emphasizing their local presence in order to suggest that this local experience helps them to do a better job of serving consumers.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

47.

When discussing the marketing planning process, STP stands for:

(p. 35)

A. Strategies, tactics, and plans.

B. Strategize, target, and promote.

C. Segmentation, targeting, and positioning.

D. Situation analysis, trend spotting, and planning.

E. Sustaining, trending, and positioning.

Segmentation, targeting, and positioning is the third step of the process.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

48. (p. 38)

Braddock University allows recent graduates to come back and take additional courses for free.

By offering additional educational services, the university is enhancing its _ in an attempt to create value for its customers.

A. segmentation strategy B. place strategy C. locational excellence strategy D. diversification strategy E. product strategy The product the students buy--a degree--is enhanced by the ability to take extra courses at no additional cost. Thus, this special offer is related to the product strategy.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Marketing Mix

49.

The idea of value-based marketing requires firms to charge a price that:

(p. 38)

A. covers costs and generates a modest profit.

B. includes the value of the effort the firm put into the product or service.

C. captures the value customers perceive that they are receiving.

D. prioritizes customer excellence above operational excellence.

E. matches competitors' prices.

Value-based marketing is related to customers' perceived value.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Marketing Mix

50. (p. 39)

E-books, in addition to being an alternative product form, provide _ _ value creation since they can be downloaded via the Internet immediately when they are needed.

A. product B. place C. promotion D. price E. primary Place refers to getting products to customers when and where they need/want them. This is what electronic downloading of e-books offers.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Marketing Mix

51.

In value-based marketing, promotion communicates the:

(p. 39)

A. targeted solution.

B. operational excellence strategy.

C. value proposition.

D. relative market value.

E. target market definition.

The value proposition is the value of the firm's offering, as explained to the target market.

Promotion is responsible for communicating this value proposition.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Marketing Mix

52. (p. 39)

Google and other search engines allow marketers to bid to have their ads shown when consumers search on keywords related to the firm's products. These marketers are attempting to create value through _.

A. product B. price C. promotion D. place E. cost-based Ads displayed in search engines are an example of Promotion.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Marketing Mix

53.

In order to effectively communicate value to target markets, marketers must first:

(p. 39)

A. consider the cost of alternative media.

B. use the Internet.

C. redesign ads to meet media specifications.

D. understand their customers.

E. hire the right ad agency.

All of these steps might factor into a value communication strategy, but the only one that is necessary in all cases is understanding customers.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Marketing Mix

54. (p. 39)

Craig sees that his company's quarterly sales and profits are significantly above projections and says, "That's great. Let's keep doing what we've been doing." Craig is ignoring the step of the marketing planning process.

A. Evaluate Performance B. Define the Business Mission C. Situation Analysis D. Implement Marketing Mix and Resources E. Identifying and Evaluating Opportunities Craig should still evaluate performance, even if results were good. There's always a chance that he was successful due to luck, not due to the quality of his plan. There's also a chance that he did well, but that he could have done even better with a stronger plan.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

55.

The first objective in the Evaluate Performance phase of the marketing planning process is to:

(p. 40)

A. determine whether to raise or lower prices.

B. adjust advertising allocations.

C. find ways to cut costs.

D. review implementation programs and results using metrics.

E. consider changing the target market.

The starting point for evaluating performance is to compare goals to actual performance and, for any goals not met, to review implementation programs looking for explanations.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

56. (p. 40)

Kathy reviews her division's quarterly results and sees that some units exceeded goals while others did not. Next, she will attempt to determine why performance of the different units varied, and whether the variation: A. created a net benefit or loss.

B. should be reported to senior executives or not.

C. was consistent with the company's mission statement.

D. offers opportunities for diversification.

E. was due to factors within or outside the firm's control.

Although the variations may point to opportunities for improvement in some units of the division, it may also be that some units faced challenges outside their control that were not faced by other units.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

57. (p. 40)

Understanding the causes of performance, regardless of whether that performance exceeded, met, or fell below the firm's goals: A. enables firms to make appropriate adjustments.

B. allows managers to demonstrate their effectiveness.

C. offers insights into value-based pricing.

D. should be followed by eliminating underperforming SBUs. E. allows firms to better assess customer loyalty.

Once the causes of above- or below-goal performance are understood, firms can decide how the marketing plan should be adjusted. Some of the other answers might be true in some cases, but not in every case.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

58. (p. 40)

Laura is reviewing sales data after a recent in-store promotion of her company's diet products.

The data show success in some stores and limited response in others. Laura will probably next review the company's: A. financial statements, to investigate current and past profits.

B. brand awareness study, to assess national levels of awareness.

C. implementation programs, to see if the promotion was handled consistently in the different stores.

D. results for other product lines, to see how important diet products are to the firm.

E. analysis of national diet trends, to predict future sales levels.

Laura should seek to understand the differences in implementation programs between the different stores. Perhaps she will find that the successful stores did things the other stores didn't.

While studies of national trends in diet products might offer interesting and useful information for the overall planning process, to understand the difference between stores Laura needs to focus at a local level.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

59. (p. 37)

After conducting STP analysis for her custom auto parts store and developing strategies for each of the four Ps, Monique now has to make _ decisions.

A. competitive response B. resource allocation C. product line D. market growth E. mission statement Monique has chosen a target market, determined positioning strategies, and developed marketing mixes. She now has to consider available resources and determine how they will be allocated across the different options available for implementation.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

60. (p. 37)

Lamar owns four dry cleaning stores in the suburbs of Orlando. He recently updated his STP analysis, and has just finished adjusting his marketing mix based on the STP results. His next strategic marketing decision will likely involve: A. how Disney World crowds will impact his business.

B. which employees to promote or fire.

C. how to allocate resources among his four stores.

D. what new government regulations might create opportunities or threats.

E. when to shift from a customer excellence to an operational excellence strategy.

Lamar should already have considered a strategy shift in an earlier step of the planning process, and should have evaluated the impact of Disney World and of possible government regulation in a situation analysis. After STP analysis, he should be considering his implementation plan for the four Ps and deciding how to allocate resources. In this case, he could invest equally in all four stores, or he could adjust his allocations according to the situation at each store.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

61. (p. 41)

In most companies, marketing resource allocation decisions are made at the SBU or _ level of the firm.

A. corporate B. product line C. customer care D. sales representative E. accounting In general, marketing resources are allocated to SBUs or product lines. The corporate level is too high unless it is a very small company with just a single product line, and the sales representative level is generally too low.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

62. (p. 41)

A(n) is a group of products that consumers may use together or perceive as similar in some way.

A. SBU B. STP C. product line D. market segment E. promotional service This is the definition of a product line.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

63. (p. 41)

Heather has been assessing a number of her firm's products using the Boston Consulting Group approach to portfolio analysis. She has been trying to assess the strength in a particular market and is looking at the sales of the product and the overall market as well as the sales of competitors. Heather is trying to determine: A. the product's relative market share.

B. the market growth rate.

C. a source of competitive advantage.

D. the impact of population shifts on future demand.

E. cash equivalent values for each product.

A company's relative share of a market is determined by comparing its market share (company sales divided by overall market size) to market shares of competitors.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

64. (p. 41)

To determine how attractive a particular market is in using the BCG portfolio analysis, is established as one axis.

A. competitive intensity B. sales dollars C. market size D. market growth rate E. market profit potential The BGC matrix uses market growth rate on one axis and relative market share on the other. The other factors are not unimportant--they are simply not part of BGC portfolio analysis.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

65. (p. 43)

In BCG portfolio analysis, products in low-growth markets that have received heavy investment and now have excess funds available to support other products are called: A. stars.

B. cash cows.

C. question marks.

D. dogs.

E. anchors.

Cash cows are product lines with high relative market share as the result of past investment, but in low-growth market. They typically generate excess cash that can be used to support other product lines.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

66. (p. 43)

Fernando was thrilled to find out that his company had just decided to invest a great deal of money in the product he was managing. He knows that even with its recent high rate of growth and the fact that it dominates its market, he would need more money to establish it firmly. Using the BCG portfolio analysis, his product would be classified as a(n): A. star.

B. cash cow.

C. question mark.

D. dog.

E. anchor.

A product with high relative market share in a high-growth market, in BCG analysis, is called a star. Stars typically require investment in order to continue to grow and to maintain or improve their market positions.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

67.

Using the BCG portfolio analysis, a "dog" should be phased out unless:

(p. 43)

A. its marketing manager is a champion of the product.

B. additional resources could increase its relative market share slightly.

C. it complements or boosts the sales of another product.

D. the market has a small chance of rebounding.

E. None of the above. Dogs should be phased out.

Dogs can be worth keeping if they assist with the sales of another more successful product.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

68.

The strategic marketing planning process:

(p. 43)

A. is a five-step process that should always be completed in order.

B. is frequently used in reverse.

C. begins with establishing specific, measurable outcomes.

D. is not always sequential.

E. forces marketing managers to think rationally.

While the steps of the process are often executed in order, sometimes a firm may jump from a later step back to an earlier one to make adjustments. Metrics are established later in the process. And while the planning process may help managers to think more clearly, irrational plans can still be developed!

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

69.

Which of the following is NOT one of the four major growth strategies marketers typically utilize?

(p. 44)

A. market penetration B. market development C. segment development D. diversification E. product development The four growth strategies are market penetration, market development, product development, and diversification.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

70. (p. 45)

For many years, because of the size of the U.S. economy, domestic companies ignored international markets, preferring instead to develop new product offerings for existing customers. These companies were pursuing a _ _ strategy.

A. market penetration B. market development C. segment development D. diversification E. product development The product development strategy is one in which firms develop new products for their existing customers.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

71. (p. 44)

Adrienne decides to add new sales representatives and increase advertising in her existing market for her current line of security systems. Adrienne is pursuing a growth strategy.

A. segment development B. market development C. market penetration D. diversification E. product development Adrienne is trying to sell more of her current products to current customers, which is a market penetration strategy.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

72. (p. 44)

Sarah has decided to pursue a market penetration strategy for her French cookware product line. She will likely increase advertising and sales promotion. She may also consider: A. getting the stores who carry her products to promote them more heavily.

B. investing in a travel agency.

C. shifting resources into a new line of European-styled footwear.

D. expand into new geographic regions.

E. offering French cooking classes.

A market penetration strategy is one in which current products are sold to current customers, hoping to increase sales among these customers. Increasing promotion in current stores would be a good step toward this goal. Expanding into a new geographic region would be an example of market development (selling current products to new customers). Selling footwear or French cooking classes both involve new products, and would be either product development or diversification, depending on the target market.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

73. (p. 45)

A _ growth strategy employs the existing marketing offering to reach new market segments.

A. product proliferation B. market development C. market penetration D. diversification E. product development This is the definition of market development.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

74. (p. 45)

Quitman sells his business language dictionary to college students throughout the United States. He wants to start selling the book to international students abroad. Quitman wants to pursue a growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development Since Quitman wants to sell an existing product to new customers, this is a market development strategy.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

75. (p. 45)

When pursuing a market development strategy, expanding into international markets is generally: A. more risky than expansion in domestic markets.

B. impossible due to negative attitudes about American products.

C. executed with the help of international trade subsidies.

D. simplified by creating new products for export markets.

E. the only option offering substantial opportunities for growth.

International expansion is usually riskier because there are many differences--cultural differences, economic considerations, and political and legal differences, for example--to consider.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

76. (p. 45)

H&R is a small, local heating and air conditioning business. The area military base is a potential source of growth, and H&R already installs and services the type of equipment the military would require, but it is difficult to get established as a certified government contractor. H&R is considering a _ growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development This is a market development strategy because the military is a new type of customer, but H&R's current offerings would be used.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

77. (p. 45)

Many states create licensing requirements for a variety of professionals (such as lawyers and accountants) designed to restrict entry into their market by professionals from other states. This strategy limits growth strategies.

A. product proliferation B. market development C. market penetration D. diversification E. product development By restricting the ability of lawyers and other professionals to easily expand their businesses across state lines, states are preventing these professionals from selling existing services to new customers. These would be market development opportunities.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

78. (p. 45)

Marketers who design and offer new products and services to their existing customers are pursuing a growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development This is the definition of the product development growth strategy.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

79. (p. 44)

Most banks now have customer relationship software which, when a customer contacts the bank, tells the service representative what types of accounts, loans, and credit cards the customer currently has. Service representatives use this information to sell some of the other services the bank currently offers to these customers. This is a _ growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development Selling more services to existing customers is a market penetration growth strategy. If these were newly developed services, this would be a product development example.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

80. (p. 45)

Maryam called her auto insurance agent to renew her policy. The agent told her about new types of insurance that are now available--to cover her apartment, or even the engagement ring she just got from her fiancé. The agent was pursuing a growth strategy.

A. product development B. market development C. market penetration D. diversification E. product proliferation The agent is trying to sell new types of insurance to a current customer, which is a product development strategy.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

81. (p. 46)

Introducing newly developed products or services to a market segment the company is not currently serving is called: A. product development B. market development C. market penetration D. diversification E. product proliferation This is the definition of diversification.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

82.

As discussed in the chapter opening, Dunkin' Donuts, Starbucks, and McDonald's have all found

(p. 25-26, ways to succeed in the branded coffee market. How have they managed to do this?

Opening vignette)

A. They use higher-quality ingredients than do other firms.

B. Each of the firms employs marketing strategies that take advantage of the firm's unique strengths.

C. They avoid opening stores near competitors' locations.

D. They have agreed to divide the coffee market between them, and thus can avoid competing with each other.

E. They have competed in the coffee market for so long that their success is guaranteed.

Each firm competes in a different part of the market; however, this is not the result of collusion between the companies. Each has developed a strategy that fits its strengths.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

83. (p. 27)

Zara is a women's clothing retailer headquartered in Spain, with stores located in many countries. Zara has developed a "quick response" system that allows store merchandise to be adjusted rapidly to fit changing customer preferences. Every aspect of Zara's operation is optimized for this system, making it difficult for competitors like The Gap to duplicate. Zara has established: A. customer loyalty.

B. locational excellence.

C. a diversification growth strategy.

D. a sustainable competitive advantage.

E. a related diversification opportunity.

Zara has established an advantage that is difficult to copy-this is a sustainable competitive advantage.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

84. (p. 28)

Fourteenth National Bank prides itself on offering better service than any of its competitors. If this is accurate, and if customers recognize and value Fourteenth National's superior service, the bank creates and delivers value through: A. promotional excellence.

B. product excellence.

C. operational excellence.

D. global excellence.

E. customer excellence.

Superior service is a key facet of a customer excellence strategy.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

85. (p. 28)

Anita has gone to the same hair salon for the past ten years. She believes that her stylist, the salon owner, does a better job of cutting and styling her hair than anyone else could. Other salons have opened closer to Anita's home, some offering more plush facilities or lower prices, but she isn't tempted to switch. Anita's attitude toward the salon is an example of: A. a sustainable competitive advantage.

B. a customer retention program.

C. an opportunity, in SWOT analysis.

D. customer loyalty.

E. the benefits of a locational excellence strategy.

By refusing to consider competitive offerings and staying in a long-term relationship with the salon, Anita is demonstrating loyalty to her stylist and salon. If the salon has a large number of loyal customers due to the quality of its service, that could be considered a sustainable competitive advantage, but one loyal customer isn't enough to establish that.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

86.

Customer retention programs are based on what concept?

(p. 28)

A. Customer excellence is the easiest macro strategy to follow.

B. Customer relationships should be viewed from a lifetime value perspective.

C. It is important to maximize profits in the first few months of a customer relationship.

D. Segmentation, targeting, and positioning analysis should not be rushed.

E. Firms must spend large amounts of money to retain customers.

Taking a lifetime value view of customer relationships demonstrates that profits through the entire relationship matter more than short-term profitability. While it is true that STP should not be rushed, this is not the focus of customer retention programs. Maximizing profits at the expense of relationships is almost the opposite of customer retention programs, since it focuses on quick profits at the possible expense of larger profits in the long run. The other two incorrect choices may be true in a few instances but they are often not true; customer excellence can be extremely difficult to achieve, and customer retention does not necessarily demand high levels of spending.

AACSB: Analytic Blooms: Understand Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

87. (p. 28)

Most banks implement customer retention programs aimed at their best customers. They do this because they know that retaining customers usually results in: A. a product development growth strategy.

B. an operational advantage.

C. opportunities for diversification.

D. increased long term profits.

E. more clearly defined market segments.

Customer retention programs recognize that it is often worth spending something in the short term to keep a customer in the long term. This approach looks at the value of the customer relationship on a lifetime basis instead of considering only the current transaction.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

88. (p. 30)

Some universities offer online degree programs, competing with traditional colleges based on the convenience of taking online courses. These online programs are pursuing which macro strategy?

A. Customer excellence B. Locational excellence C. Operational excellence D. Product excellence E. None of these Online courses are available anywhere, as long as the student has Internet access and a computer or mobile device. Online delivery may create efficiencies (related to operational excellence) and may produce better service (customer excellence) or a better educational product (product excellence), but we cannot be sure from the question that these forms of excellence are being achieved.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

89. (p. 27)

When a pharmaceutical company develops a new medication, it typically applies for a patent in order to prevent competitors from developing copycat products for several years.

Pharmaceutical companies apply for patents in order to establish: A. an operational excellence macro strategy.

B. a market penetration growth strategy.

C. a sustainable competitive advantage.

D. an efficient supply chain.

E. all of these.

The patent protects the company's product from imitation, thus creating a competitive advantage that is sustainable through the life of the patent.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

90.

One example of a customer loyalty program is:

(p. 28)

A. a "frequent diner" card at a restaurant, offering a free appetizer for every $100 in food purchases.

B. a quantity discount offered for large purchases at an office supply store.

C. all of these.

D. an "everyday low price" policy on all products at a grocery store.

E. an extensive customer service training program for new employees at a hair salon.

A "frequent diner" program gives a customer an incentive to visit the restaurant more often, even if competitors try to win customers away with special menus or other offers, because the customer wants to earn the rewards that come with frequent visits.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

91.

Excellence in human resource management is an element of which of the macro strategies?

(p. 30)

A. Customer excellence B. Employer excellence C. Locational excellence D. Operational excellence E. Product excellence Strength in human resource management (i.e., maintaining good relationships with employees) usually leads to a more committed, more productive work force, thus improving efficiency.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

92.

Which of the following is the third step in the strategic marketing planning process?

(p. 32)

A. Define the business mission.

B. Identify and evaluate opportunities.

C. None of these.

D. Implement marketing mix and allocate resources.

E. Situation analysis.

The steps, in order, are: (1) Define the business mission, (2) Situation analysis, (3) Identify and evaluate opportunities, (4) Implement marketing mix and allocate resources, and (5) Evaluate performance AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Plan

93. (p. 32)

In mid-2010, Hewlett-Packard Company (HP) acquired Palm Computing, Inc., a manufacturer of personal devices and smart phones. Before deciding to acquire the company, strategic planners at HP spent time thinking about how Palm and HP would "fit" together, and how the acquisition might change HP's core goals and objectives. The strategic planners were engaged in the step of the strategic marketing planning process.

A. Situation analysis B. Implement marketing mix and allocate resources C. Identify and evaluate opportunities D. Evaluate performance E. Define the business mission By considering questions of "fit" and changing objectives, the planners are considering HP's business mission and how the acquisition might change it.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Plan

94.

After defining the business mission, what should a firm do next to develop a marketing plan?

(p. 32)

A. Conduct an STP analysis.

B. Perform a situation analysis.

C. Develop a positioning strategy.

D. Select a target market.

E. Implement the four Ps. A situation analysis is the second step of the marketing planning process.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Plan

95. (p. 34)

In a SWOT analysis, increasing gasoline prices would represent a potential __ manufacturers of electric cars.

for

A. weakness B. threat C. opportunity D. operational advantage E. locational advantage Higher gas prices should make consumers more likely to consider buying electric cars, so this is a positive factor. It is external to the firm since it is beyond the firm's control. An external positive factor is an opportunity.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

96. (p. 36)

An advertising campaign for Geico Insurance uses the slogan, "So easy, even a caveman could do it" to emphasize the ease of buying insurance on Geico's website. This campaign is part of Geico's: A. mission statement.

B. market segmentation plan.

C. product strategy.

D. customer excellence strategy.

E. positioning strategy.

Geico is seeking to define itself in customers' minds as a very easy way to save money on insurance, in order to distinguish it from its competitors. This is the nature of positioning.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

97. (p. 44)

Abercrombie & Fitch, a hip clothing retailer, includes a "Share it!" button on its website. This button encourages an Abercrombie customer to post a link to a product page (perhaps showing a new style of jeans) on Facebook or Twitter. Abercrombie & Fitch hopes that the customer's friends (who are probably very much like current customers) will click the link, visit the page, and make purchases. This is an example of a _ growth strategy.

A. product proliferation B. market development C. market penetration D. diversification E. product development In this situation, A&F is trying to sell more of its existing products to its current target market, which is a market penetration strategy. Market development would involve attracting new market segments, but the company is assuming that the friends of current customers will be similar to those customers (and thus part of the same market segment).

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

98. (p. 46)

Sodexho is a corporation that manages school cafeterias, university dining halls, mess halls at military bases, concession stands at sports arenas, and other large-scale food service facilities.

If Sodexho were to begin to sell individual frozen meals in supermarkets, it would be pursuing a _ growth strategy.

A. product development B. market development C. market penetration D. diversification E. product proliferation Individually packaged frozen meals would be a new product area for Sodexho (even though it is still a food, the manufacturing process would be quite different from the bulk food service required by cafeterias and dining halls). Consumers in grocery stores would also be a new market, since Sodexho currently serves universities, the military, and the like. Thus, with a new market and a new product, this would be an example of diversification.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

99. (p. 43)

The Apple iPad is the market leader in the new--and fast-growing--tablet computer market.

Based on BCG portfolio analysis, how should Apple handle allocating resources to the iPad? A. Apple will not need to invest much; instead, the iPad can generate funds to support other product lines.

B. Apple should watch the situation but not invest much yet, since the future of the market is uncertain.

C. Apple should be prepared to invest heavily to help the iPad to achieve its maximum potential in the market.

D. Apple should not invest in this market until it has more competitors.

E. Portfolio analysis doesn't offer any advice about resource allocation.

The iPad has high relative market share in a small but high-growth market. This makes it a Star in the BCG framework, and Stars usually require substantial investment to reach their full potential.

AACSB: Analytic Blooms: Analyze Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

100. (p. 38, Adding Value 2.1)

3M involves its customers in the process of developing new products. In this way, it can benefit from current customers' insights and develop new products that will meet these customers' needs. 3M is pursuing a _ growth strategy.

A. Diversification B. Market development C. Market penetration D. Product development E. Product penetration While some of the new products may attract new markets (which would represent diversification), the initiative described is aimed primarily at developing new products to serve current customers, and so represents a product development strategy.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

101. (p. 27)

Over the last few months, Juan and his colleagues have analyzed the current business situation, and then identified target markets for his firm's personal care products. Finally, they developed the products, prices, distribution and promotion that should appeal to each of those target markets. In doing so, Juan has also identified what he believes is an advantage his competitors cannot match. Juan and his colleagues have been developing: A. a business mission statement B. a strategic vision C. team-building exercises D. a marketing strategy E. competitive assessments The question describes the situation analysis, STP, and positioning steps of developing a marketing strategy, as well as a potential sustainable competitive advantage.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

102. (p. 28)

Gerald's Tire Store sets itself apart from competitors by the extra attention it pays to providing fast, courteous service in a clean, professional looking environment. Gerald's has used this strategy for over 40 years, expanding to 15 outlets. Gerald's Tire Store has created a _ to create and deliver value and to develop a sustainable competitive advantage.

A. segmentation strategy B. set of metrics C. market development strategy D. diversification strategy E. macro, or overarching, strategy Gerald's Tire Store has a macro strategy focusing primarily on customer excellence, based on the quality of customer service mentioned in the question.

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

103. (p. 30)

Which of the following is the best way to build a sustainable competitive advantage using product excellence?

A. Being the first to offer customers desired features, even if competitors can copy them easily.

B. Positioning the product using a clear, distinctive brand image.

C. Having the most features on each model.

D. Focusing on being cutting edge and continually eliminating older features that are still in use by customers.

E. Copying the market leader's features, but at a lower cost.

The incorrect options all describe ways to create new product models that are probably easy for competitors to copy (or that, in one case, copies competitors' offerings). A clear, distinct, positioning, though, offers a more sustainable advantage through product excellence.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

104.

A competitive advantage based on location is often sustainable because:

(p. 30)

A. mobile marketing has not yet proven its value for most customers.

B. real estate prices have been dropping.

C. few marketers are aware of its importance yet.

D. it is not easily duplicated.

E. the internet has diminished the importance of "brick and mortar" stores.

If you have a wide variety of locations in prime areas, that's difficult (and often expensive) for a competitor to duplicate. While some of the other answers are true statements, they don't explain why a locational excellence strategy tends to be sustainable.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

105. (p. 27)

Four companies dominate the cereal industry. These firms produce in large volumes, promote heavily, and control access to the supermarket shelves through "slotting allowances," which are payments to retailers in return for shelf space. Combined, these four firms have: A. identical marketing mixes.

B. all of these.

C. a sustainable competitive advantage.

D. achieved product excellence.

E. violated laws governing competition.

While some of the other statements might be true, we don't have enough information in the question to draw those conclusions. But what's been described is a sustainable competitive advantage because it's so difficult for another competitor to break into the market.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

106.

Value creation through Place decisions for a consumer product involves:

(p. 39)

A. putting the product in the front of the store.

B. designing creative displays to capture consumers' attention.

C. pricing products differently at different stores.

D. making sure the product is available in the stores where customers will want to find it, and that it is always in stock so they can buy it when they want to.

E. focusing exclusively on internet sales to reduce supply chain costs.

Value creation through Place has to do with making sure the product is available when and where the customer wants it. Some of the other options (like the creative displays, or putting the product in the front of the store) may cause more consumers to notice the product, but the correct answer is the one that best describes ensuring that the product is available to the customer.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

107. (p. 39)

In recent years, cellular (mobile) service providers have worked hard to eliminate "dead zones," providing customers with service wherever they traveled. By working to make the network available in more locations, cellular service companies were focusing on value creation.

A. product B. price C. promotion D. place E. financial By making sure the mobile network is available to use where and when customers want it, cellular service companies are working on place value creation.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

108. (p. 40)

When firms successfully implement poor strategies (perhaps due to good luck) or do a poor job of implementing good strategies, it can be difficult to: A. generate cost-based performance ratios.

B. evaluate performance and make adjustments.

C. increase product excellence without reducing customer excellence.

D. develop segmentation strategies.

E. choose a business mission.

Good luck may mask the weaknesses in a bad strategy, and poor execution may mask the strengths of a good strategy, making evaluation difficult in both cases.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

109. (p. 45)

In 2007, Apple Computer Company introduced its new iPhone, adding a cellular telephone, a camera, and Internet access to its iPod. The company was pursuing a(n) _ strategy.

A. market development B. market penetration C. operational excellence D. customer excellence E. product development Apple was creating a new product for its existing customers, which is a product development strategy. Some people might believe that the iPhone wasn't for Apple's existing customers, but was for new customers, which would make "diversification" the best answer. But since that answer isn't offered, "product development" is the best of the remaining examples.

AACSB: Analytic Blooms: Understand Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

110. (p. 28)

The goal of a customer excellence strategy is to gain loyal customers. Customer loyalty can be developed through: A. having a strong brand B. offering unique merchandise C. providing superior customer service D. all of these E. none of these A customer excellence strategy relies on all of these methods, among others. In essence, firms that provide superior value are most likely to have loyal customers.

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

111. (p. 30)

Allen is in the marketing department of a mid-sized firm that develops and sells communications systems. He is proud of the Human Resources area in the company that provides the firm with excellent employees. Allen himself really enjoys his work, but he knows the work of HR helps create an advantage for the firm because: A. customers appreciate the kind of service that knowledgeable employees provide.

B. employees play a major role in the success of the firm.

C. it is easier to communicate with and inspire the customer if the employees believe in what the firm is doing.

D. building customer loyalty depends on a committed workforce.

E. All of these.

Excellence in human resources management is one aspect of operational excellence, for all of the reasons listed.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

112.

In its Campaign for Real Beauty, Dove was able to connect with important parts of its customer

(p. 37, base by: Social and Mobile Marketing A. creating high impact campaigns at a lower cost.

2.1)

B. expanding beyond traditional constraints of advertising.

C. connecting directly with customers via the internet.

D. All of these E. None of these Dove's Campaign for Real Beauty, launched on the Internet, allowed the brand to reach out directly to customers, bypassing the typical constraints of mass media advertising and also saving money.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

113.

After performing an STP analysis, marketers implement

_ for each target market.

(p. 37)

A. pricing strategies B. promotion strategies C. place strategies D. product strategies E. all of these These are the four elements of the marketing mix.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

114. (p. 40)

Brad is reviewing the performance of his franchise sandwich store. As a franchisee, he has access to comparative data from other stores. Brad will likely look at _ data for other stores to help him to evaluate his performance.

A. sales B. gross margin C. number of customers D. coupon redemption E. all of above This comparison process will help Brad to determine whether or not his stores are performing as well as they might. All of the types of data mentioned could be useful in this analysis. Sales and number of customers will measure the amount of business he is receiving; coupon redemption will measure the effectiveness of sales promotions, and gross margin will measure his profitability and operating efficiency.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

115. (p. 43)

Portfolio analysis is a useful and powerful tool, but firms often need to take a more balanced approach because: A. measures are difficult to obtain and project.

B. classifications can become self-fulfilling prophecies and strengths and weaknesses are distorted.

C. substitute approaches can offer different insights.

D. All of these.

E. None of these.

These are all common criticisms of portfolio analysis tools.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

116. (p. 42, Ethical and Social Dilemma 2.1)

Starbucks has developed a number of metrics beyond purely financial metrics. Knowing the importance of perceptions and knowing the importance of developing ways to demonstrate its activity, Starbucks tries to find clear ways to: A. build brand equity.

B. demonstrate its sense of corporate social responsibility.

C. address concerns of opponents at local, regional, national and global levels.

D. help consumers to feel better about their purchases.

E. All of these Starbucks has important goals to measure that go beyond financial performance.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

117. (p. 31)

Greta is the marketing director for the Pump-N-Slurp convenience store chain. She recently developed a marketing plan for the firm and presented it to company executives. Which of the following did Greta probably include in Pump-N-Slurp's marketing plan?

A. Specific plans for each of the four Ps. B. Marketing objectives.

C. Opportunities for the firm.

D. Perceived weaknesses of the firm.

E. All of these.

All of these are part of the marketing planning process. Marketing objectives will be derived from the business mission and corporate objectives, opportunities and weaknesses are part of the situation analysis, and plans for the four Ps will be part of the positioning strategy.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

118.

Marketers want their firms to develop efficient operations because this kind of efficiency:

(p. 29)

A. usually leads to lower prices or greater pricing flexibility.

B. allows the firm to offer greater value to customers.

C. makes it easier to get the products customers want to them when they want them.

D. can lead to more attractive margins.

E. All of these Operational efficiency offers the firm a wide range of benefits, many of which are related to pricing and margins.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

Essay Questions 119.

Of what use is a sustainable competitive advantage to a firm?

(p. 27)

Establishing a sustainable competitive advantage makes it hard for competitors to enter a market or attract a firm's customers. The advantage should difficult to copy and should be something that can be maintained over time.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

120. (p. 28)

The text states, "Viewing customers with a lifetime value perspective, rather than on a transaction-by-transaction basis, is the key to modern customer retention programs." Create an example demonstrating a lifetime value perspective. Why is customer retention almost always a profitable marketing strategy?

Answers to the first part will vary but should demonstrate how much business a customer brings in over a lifetime. For example, a customer spending $4.00 at Starbucks, five days per week, for 20 years equals $20,800. Customer retention is profitable because it costs more to get new customers than to retain existing ones AACSB: Analytic Blooms: Apply

Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

121.

Although most people do not have a personal marketing plan, when would one be appropriate?

(p. 31)

Students might reflect on their own personal circumstances, but three plausible responses include the choice and process they used to select the college or university, a potential marriage and pursuing a job.

AACSB: Analytic Blooms: Evaluate Difficulty: 3 Hard Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Plan

122. (p. 27)

One of the benefits of taking marketing courses is the opportunity to apply marketing concepts to marketing yourself. When selling yourself, you are a product including all the skills, aptitudes, and attitudes you bring to the market. What is a sustainable competitive advantage? What can you do to give yourself a sustainable competitive advantage in the marketplace?

A sustainable competitive advantage is something you can persistently do better than the competition. Skills including statistical analysis, ability to use technology, communication, and accounting etc, are all important and valuable. Aptitudes including rational thinking and problem solving are lifelong abilities that can benefit any organization. Attitudes such as persistence, a sense of humor, teamwork, are valuable in any business environment. But, as best-selling author Steven Covey suggests, we must always "sharpen the saw," meaning continually grow and learn in order to be successful and maintain a sustainable competitive advantage.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

123. (p. 32)

Your marketing professor, Dr. Marketing, has been asked to participate in the university's strategic marketing planning process. During the planning phase of the process, what questions will Dr. Marketing likely ask? Be specific to the university's strategic marketing planning process.

Answers will vary but should begin with discussion of creating or revising the university's mission statement, leading to questions of what type of university are we, and what does the university need to accomplish its goals and objectives?

Additionally, discussion of the mission statement will likely lead to questions concerning what and how can the university build a sustainable competitive advantage?

Dr. Marketing will also assist with the situation analysis. This will include internal examination of the current status of the university including questions concerning, what are the university's strengths and weaknesses? Questions about external forces, threats and opportunities will also be asked during the SWOT analysis.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Plan

124. (p. 27)

The text describes firms like Netflix and Southwest, who operate in competitive markets but successfully differentiate themselves from the competition. This gives them a sustainable competitive advantage. What is a sustainable competitive advantage? Describe an example of a product or business you have encountered that has developed sustainable competitive advantage. Why is that product or firm advantage sustainable?

A sustainable competitive advantage is something you can persistently do better than the competition. Student's examples will vary but should include product, operational, locational, or customer excellence that competitors have not been able to duplicate.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

125.

Your marketing professor, Dr. Marketing, has been asked to participate in the university's

(p. 35-37) strategic marketing planning process. After completing the planning phase of the process, Dr.

Marketing has been asked to assist with the STP analysis. What questions will Dr. Marketing ask during the STP analysis? Be specific to the university's strategic marketing planning process.

STP analysis includes segmentation, targeting, and positioning. Dr. Marketing will ask what basis for segmentation should be used. Should the university's market be divided based on age, income, geographic area, or maybe educational interests? After segmentation, the next question is which segments can be pursued profitably, or targeted?

Many market segments will likely be identified but Dr. Marketing will often have to ask, "Can we effectively and efficiently reach that group of potential consumers?" (For example, one university considered providing educational services to a local prison but ran into a host of problems making it impossible to target that market.)

Lastly, Dr. Marketing will ask questions about how the university intends to position itself in the various market segments. What products or services are going to be promoted? How are the university's products and services different from what competitors are offering? Where and how can the university build on existing strengths?

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

126. (p. 36)

As the text states, "Firms typically are most successful when they focus on opportunities that build on their strengths relative to those of their competition." Using the automobile industry in the United States, describe an example of this type of positioning strategy.

Answers will vary and change over time but likely choices include Toyota's Scion products, lower-priced cars targeting younger consumers or their Lexus division of upscale cars introduced years ago. In both case, Toyota built on its reputation for quality products (though that reputation has been somewhat tarnished lately). Another possibility is the recent repositioning of GM's Hummer using ads with women drivers. The hybrid autos are a third possibility.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

127.

Your marketing professor, Dr. Marketing, has been asked to participate in the university's

(p. 37-39) strategic marketing planning process. After completing the first three steps of the process, Dr.

Marketing has been asked to assist with implementing the marketing mix and allocating resources. What questions will Dr. Marketing ask? Be specific to the university's strategic marketing planning process.

Dr. Marketing will ask marketing mix and resource allocation questions. Dr. Marketing will ask general product questions such as, "which courses and degree programs will create the most value for our consumers?" What prices should we charge for in-state and out-of-state students?

What prices should we charge for graduate versus undergraduate programs? Should we charge higher or lower prices for online programs? Place or value delivery questions might include whether to emphasize day or night programs, classroom or online programs? Should the university open satellite campuses? Lastly, Dr. Marketing will ask questions regarding where and how to promote the university's programs? One of the critical but potentially controversial questions will be how to allocate the university's resources. Virtually every program on campus will want more resources and think their program creates the most value for students. Dr. Marketing will have to be careful when recommending additional resources for the marketing program!

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Implement Marketing Mix

128.

Jamie, a sales manager for an industrial materials company, reviews each sales (p. 39-41) representative's performance quarterly. She knows business has been good but is surprised to see some reps are selling much more than their goals while others have not meeting their goals.

What should Jamie do?

Jamie should start by looking closely at the data. Were the successful sales people selling one or two items at discounts in order to generate volume or did they sell the full line of the company's materials to each customer, resulting in increased sales? Did the poorly performing sales reps sell to fewer customers, make too many small sales, or fail to sell the full line of materials? After reviewing the data, Jamie will probably talk with each sales rep and ask about that person's results, both those exceeding goals and those not meeting goals. Jamie will seek to explain the variation and utilize the information to make changes.

AACSB: Analytic Blooms: Evaluate Difficulty: 3 Hard Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

129.

You and your friend Alison work in different parts of a large firm. In a recent analysis, your area

(p. 41-43) was labeled a "cash cow" and hers was labeled a "question mark." What things would you do

differently in your area than Alison would do in hers?

There are many possible answers, but students should understand the different kinds of strategies, the use of resources and the future of each unit.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

130.

Boston Consulting Group's Portfolio Analysis classifies a company's products or product lines

(p. 41-43) into a two-by-two matrix. What are the bases of classification and what are the products or

product lines in each of the four quadrants called? What marketing strategies are usually considered for each of the four classifications?

The two bases of classification are relative market share (high-low) and market growth rate (high-low). This leads to four quadrants labeled stars, cash cows, dogs, and question marks. * Stars: high market share/high growth rate. Usually require continued promotion efforts and expansion of production capacity. * Cash cows: high market share/low growth rate. Sources of funding for other parts of the firm.

They typically require modest promotional and production support. * Dogs: low market share/low growth rate. Candidates to be phased out unless they are needed to complement or boost sales of other products. * Question marks: low market share/high growth rate. Candidates for strategic marketing planning, assessing potential for growth.

AACSB: Analytic Blooms: Evaluate Difficulty: 3 Hard Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

131.

Your new sales manager, who previously worked for Boston Consulting Group, directs each

(p. 41-43) sales rep to "toss out the dogs," "exploit the stars," and "milk the cows." Translate this into

everyday English: what is the sales manager asking the sales reps to do?

Your sales manager wants you to stop selling those products that are in slow growth markets and which the company has a small relative market share. The manager also wants you to spend more time and effort selling products that are in high growth markets and which the company has a high market share. Finally, you should continue to sell but not put additional effort into high relative market share, low market growth products, referred to as cash cows.

AACSB: Analytic Blooms: Understand Difficulty: 3 Hard Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Portfolio Analysis

132.

After finishing his marketing degree, Ryan inherited the family shrimp shack restaurant. The

(p. 44-45) restaurant is a small, local institution that beach visitors have been coming to for decades. Ryan

wants to make his business grow and is considering either a market penetration or market development strategy. Describe what Ryan will likely do if he pursues either strategy.

If Ryan pursues a market penetration strategy, he will likely expand advertising and promotion, maybe adding billboards, promoting specials, adding hours and likely expanding the restaurant to serve more customers.

If Ryan pursues a market development strategy, he will attempt to serve new market segments.

Since his product is a restaurant, market development would likely include opening additional locations in other areas, offering the same menu.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

133.

Garden Gate is a one-location nursery business, selling plants and flowers for home gardeners.

(p. 45-46) The new owners want to grow through either a product development or diversification strategy.

What will the owners likely do if they pursue either strategy?

If they pursue a product development strategy, they will offer new products or services to the firm's current target market. A nursery could logically provide a landscape design consulting service, landscape maintenance service, soil and pest testing service or add additional products such as indigenous plants.

If they pursue a diversification strategy, they would market new products or services to a market segment they are not currently serving. Targeting landscape design or maintenance services for commercial customers would be one type of diversification.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

134.

Why is a good marketing strategy necessary for a firm?

(p. 27-46)

Many elements might be included, but it is important for students to demonstrate they understand the importance of allocating resources, leveraging competencies, capitalizing on strengths and minimizing weaknesses, coordinating efforts and decisions, and facilitating smooth operations for the firm.

AACSB: Analytic Blooms: Evaluate Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

135.

Why is it important to have a structured approach to planning and developing a marketing plan?

(p. 31-46)

Firms operate in a complex environment, and it is easy to overlook critical issues in the overwhelming possibilities. A structured approach will minimize the possibility that important items will be overlooked. It is also a way to ensure the transparency for the rest of the organization who depend on marketing for leadership.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

136. (p. 29)

Southwest Airlines is known for being the low-cost provider in the U.S. airline industry. What type of macro strategy has Southwest pursued?

Operational excellence, because it focuses on efficiency in its supply chain.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

137.

What is the goal of product, operational, locational, and customer excellence?

(p. 28-31)

Creating and developing customer value.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-05 Outline the implementation of the marketing mix as a means to increase customer value.

Topic: Marketing Strategy

138. (p. 32)

Every summer, university administrators attempt to estimate how many students will show up in the fall. When August arrives, they hire part-time instructors and reassign faculty to teach the courses students want. In the spring, administrators often go on a retreat to consider how to do things differently next year. What phase of the strategic planning process do they engage in during each of the three seasons (summer, fall, and spring)?

Summer--planning; Fall--implementation; Spring--control.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Planning Process

139.

Firms periodically conduct SWOT analyses. Why?

(p. 33-34)

SWOT analyses help a firm evaluate the current situation, both the internal environment and external environment.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

140.

When using STP, what types of opportunities provide the greatest potential success?

(p. 36)

Opportunities that build on a firm's strengths relative to those of their competitors.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-04 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts.

Topic: STP

141. (p. 44)

When catalog companies send sale catalogs to their current customers, which type of growth strategy are they pursuing?

Market penetration, because the companies are trying to sell additional products (marked down) to current customers.

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

142. (p. 45)

When musicians and their concert promoters began offering CDs of a live concert, immediately after the concert ended, what type of growth strategy were they pursuing?

Product development, because the CD is a new product (just recorded) and it's being sold to current customers.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

143.

Several years ago, the Florida Orange Juice Growers Association ran a promotional campaign

(p. 44-45) with the slogan: "Orange juice. It isn't just for breakfast anymore." Based on this slogan, which of

the four growth strategies was the association pursuing? Briefly explain your reasoning.

The best answer is that this is a market penetration strategy. The slogan seeks to increase sales of a current product (orange juice), which reduces the options to market penetration or market development. "It isn't just for breakfast anymore" sounds like the Growers Association wants those who drink orange juice at breakfast time to consider it at other times of the day too. In other words, it focuses on increasing usage among current customers, which is market penetration.

Some students might say that it is a market development strategy. For this to be correct, they would have to argue that a different market segment that currently doesn't drink orange juice is being targeted.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-07 Describe how firms grow their business.

Topic: Growth Strategies

144.

Suppose that you and a friend decide to turn your favorite sports activity--inline skating--into a

(p. 44-46) business. You plan to design a line of fashionable clothing that integrates elbow and kneepads.

For each of the four macro strategies, briefly describe the most important thing your company should do if you intend to focus on that strategy. Your answers should be specific to the inline skating business.

There are many correct answers; here is a sample. To make this question easier, you could ask the student to provide an idea for just one or two of the macro strategies. * Product excellence: Focus on continually improving the products and making them the most advanced ones on the market, perhaps using stylish yet durable fabrics that won't be damaged in a fall. Then work to develop a clear positioning statement for your brand. * Customer excellence: Offer outstanding service, perhaps including live chat on the website as well as no-hassle returns if the customer changes his or her mind about a purchase. * Operational excellence: Develop close relationships with suppliers of fabric and other raw materials and with retailers. * Locational excellence: In addition to having a top-notch website, try to get your products into as many retail stores as possible, probably focusing on sporting goods stores.

AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-01 Define a marketing strategy.

Topic: Marketing Strategy

145.

Conduct a brief SWOT analysis of your prospects of finding a good job related to your major

(p. 33-34) when you graduate (if you already have such a job, think about finding a job with more

responsibility). Be sure to include at least one factor representing each of the four major sections of a SWOT analysis, and be sure to label each factor to indicate which of those four sections it belongs in.

In order to make sure the students clearly classify the factors, you might want to provide an answer space with four sections; in each one, include a blank line for the name of the section and additional space for the factor.

Students will come up with a variety of answers depending on their individual situations. They will probably need to do some speculation for Opportunities and Threats. Here is a sample: * Strengths - students might mention internship experience, past work experience, classes taken, personal characteristics, or personal contacts * Weaknesses - possibilities include lack of experience, inability to relocate, or a low GPA * Opportunities - could include expected growth in the field, a new firm starting up in the area that will be hiring, or a shortage of graduates in the field * Threats - could include the recession, a glut of graduates in the field, or reduced demand for professionals in the field AACSB: Analytic Blooms: Analyze Difficulty: 3 Hard Learning Objective: 02-03 Analyze a marketing situation using SWOT analyses.

Topic: SWOT Analysis

146.

In July, 2010, Microsoft discontinued the Kin, its social networking phone, after just six weeks of

(p. 39-40) disappointing sales. During what step of the strategic marketing planning process would

Microsoft have made the decision to stop offering the product?

Step 5--Evaluate performance using marketing metrics.

Some students might also answer "Control phase." Strictly speaking, this is a phase and not a step; however, Step 5 is the only step of the process that fits into the Control phase, so you may want to accept both as correct answers.

If you want to make this question more difficult, you can add to the question the following: "What should Microsoft have done before deciding to discontinue the product?" The answer: Microsoft should have determined the causes for the disappointing sales in order to determine whether or not another action (perhaps a different target market, a price adjustment, or a revised promotion plan) could put sales back on track.

AACSB: Analytic Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-06 Summarize portfolio analysis and its use to evaluate marketing performance.

Topic: Evaluate Performance

147.

Suppose that you and a friend decide to turn your favorite sports activity--inline skating--into a

(p. 32-41) business. You plan to design a line of fashionable clothing that integrates elbow and knee pads.

In launching your business, you complete all the activities listed below (though not necessarily in this order). For each listed activity, identify the step in the strategic marketing planning process it represents. a. You track sales and profits, and discover that pants are selling better than shirts, apparently because the shirts are too expensive. You will look for a lower-cost supplier for shirts, or consider dropping your prices if you can afford to do so. b. You realize that your experience as skaters is a plus; however, your lack of experience in selling clothing could hurt you. You find out that a skateboard shop in town wants to branch out into inline skating; however, you also find out that Nike is thinking about expanding its product line to include special inline skating clothes. c. You decide that you will target college students who enjoy inline skating, and will aim to establish yourself as a company that offers trendy clothes for the student budget. d. You decide that your business focus will be to offer fashionable yet durable clothing for inline skaters, with built-in protection for knees and elbows. e. You offer clothing that college students would want to wear, price it for a student budget, sell it online and in sports stores near college campuses, and promote your products on Facebook. a. Evaluate results; b. Situation analysis; c. STP; d. Business mission; e. Implementation AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 02-02 Describe the elements of a marketing plan.

Topic: Marketing Plan

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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Which of the following errors would have caused a difference in the 1) trial balance?

A) recording a sale of £30 000 as £3 000 in the Cash Book and £3 000 in the Sales Account B) posting payment of £21 000 for stationery as £12 000 to the Stationery account C) not accounting for £15 000 paid for purchasing goods for sale D) posting to Motor vehicles account £600 paid for servicing vehicles 2) Identify the account to which you would post the following transaction recorded in the Cash Account:

2)

£240 paid for advertising the availability of mobile phones for sale.

A) publicity account B)

advertising a/c

C) expenses account 3) Which of the following is the correct terminology for the right hand side of a ledger account?

A) positive B) debit C) credit D) negative

3)

4) A 'T account' is the name given to an account which appears in the ledger between the letters S and U. A) True B) False

4)

5)

5)

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Acquisition of motor vehicles A) neither B) debit

C) credit

6) Identify the account to which you would post the following transactions recorded in the Cash Account: £2 500 paid for a steel cabinet to securely lock up the books of account.

A) furniture account B) accounts safe a/c

6)

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C) steel cabinet a/c 7) When preparing a bank reconciliation statement, the balance as shown in the bank statement is reconciled with: A) the bank's account in the business's payables (creditors)' ledger

7)

B) the bank balance as shown in the previous balance sheet C) the bank balance as shown in the bank’s ledger D) the bank balance as shown in the business's cash book 8) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Bank Loan a/c A) credit 9)

8)

B) debit

Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account:

9)

Receipt of a Loan from Kingsley Perera. (Perera's Loan account) A) increase B) reduce 10) A sale of £7 800 to Peter Blowes has been posted to Paul Blowes. To correct this the journal entry should require which of the following: A) debit Sales account and credit Paul Blowes with £15 600 B)

10)

debit Sales account and credit Paul Blowes account with £7 800

C) debit Peter Blowes account and credit Sales account with £7 800 D) debit Peter Blowes account and credit Paul Blowes account with £7 800 11) If a trial balance, extracted from the double entry system of a sole trader, shows that total debits equals total credits then: A) the books are correct

11)

B) no errors will have been made in posting the transactions of the business C) the business is profitable D) an equal debit for every credit will have been posted and the accounts correctly added 12) The source documents for entries made in the Return Outwards Journal are: A)

12)

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Credit Notes issued to customers

copies of

B) Credit Notes issued by suppliers C) purchase invoices D) copies of sales invoices 13)

The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance. Identify the impact on the trial balance of the following error:

13)

When balancing the Cash account, the closing debit balance has been stated as £34 650 instead of £31 750.

A) debit short of £2 900 B) C)

trial balance balances debit excess of £2 900

14) Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Purchases a/c A) asset C) liability

B) expenditure D) income

15) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Advertising a/c A) credit

14)

15)

B) debit 16)

16) The effect of a transaction was that it reduced both the assets and the liabilities of a business by £100 000. Which of the following is that transaction likely to be: A) introduction of additional capital by the owner B) repayment of a loan C)

disposal of an asset

D) sale of goods 17) 17) Which of the following source books (books of prime entry) will not be required in a 'cash' business?

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A) Sales Ledger

B) Nominal Ledger

C) Petty Cash Account

D) Bank Account

18) For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter Return outwards during the month: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A)

b

B) c

18)

Neither

e C) a

D) d

E) e

19) Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000. During the year ending on 31 December 20x6 he paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses. He received £139 250 by sale of goods. Identify Jayantha’s profit for the year to 31 December 2001 in the following situation:

19)

Unsold goods remaining in hand on 31 December 20x6 had cost £24 550 and Jayantha wishes to write off the cost of his furniture equally over six years.

A) £37 950 B) £38 950 C) £71 400 20) 20)

Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account: Payments to buy goods for sale. (Purchases account) A) increase B) reduce

21) If a business commenced the day with £14 200, paid out £58 900 during the day and has £22 900 by the end of the day, it should have received during the day: A) £1 400 B) £67 600 C) £50 200 D) £21 800

21)

22)

22) Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Buildings account A) liability C) expenditure

B)

income

D) asset

23) Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000. During the year ending on 31 December 20x6 he paid £12

000 furnitu

for re, £92

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400 for 23) purchasi ng goods for sale and £31 450 for various expenses.

He received £139 250 by sale of goods.

Identify Jayantha ’s capital as at 31 Decembe r 2001 in the followin g situation : Jayantha had sold out all goods purchase d during the year and wishes to write off a tenth of the cost of furniture as depreciat ion.

A) £24 200

B) £10 000

C) £24 400

24) Identify the account to which you would post the following transaction recorded in the Cash Account: £2 000 paid to Dave Nicholas as interest on a loan.

A) Dave Nicholas’s Loan a/c

24)

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B) interest account C) expense account 25) Identify the year-end balance that would be brought down in the following account on 31 December 20x6, taking into account the stated transaction:

25)

Ruth Jones' Loan account: A loan of £60 000 was obtained from Ruth on 1 January 20x5, on an agreement that it will be settled in six annual instalments of £10 000 each commencing from 31 December 20x5. The agreement is being complied with.

A) £40 000 B) £60 000 C) £50 000 26) Which of the following statements is correct?

26)

A trial balance: A) lists the balances in all the accounts maintained on a double entry basis B) is prepared by a business on the last day of its accounting period C) proves the accuracy of the accounting records D) lists all entries made for accounting for business transactions 27) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

Advertising account : £240 paid for advertising the availability of mobile phones A) debit B) credit

27)

28)

28) Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Sales account A) asset C) liability

B) income D) expenditure

29)

29) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Salaries account A) credit 30) Every entry in a ledger should have:

B) debit 30)

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A) date and description B) amount C) date, description and amount D) description and amount 31) Identify the year-end balance that would be brought down in the following account on 31 December 20x6, taking into account the stated transaction:

31)

Office Equipment account: The balance in the account on 1 December 20x6 was £218 400. In December four personal computers were bought for staff use, paying £4 500 for each unit.

A) B) C) £200 400 £236 400 £218 400 32) A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Cash sales A) credit

B) debit

32)

C) neither

33) Which of the following reflects the effect on the accounting equation of a purchase of an item of plant and equipment, for cash?

A) assets increase: ownership interest decreases

33)

B) assets unchanged: ownership interest unchanged C) assets decrease: ownership interest increases D) assets decrease: ownership interest unchanged 34) A machinery acquired at a cost of £225 000, expected to be in use for five years, with no salvage value, is to be depreciated equally over its useful life. Annual depreciation then is: A) £22 500 B) £45 000 C) £112 500 D) £80 000 35) Identify the account to which you would post the following transaction recorded in the Cash Account: £4 000 paid to Ricky Nelson, the landlord, as rent for the premises used for business purposes.

A) Ricky Nelson a/c B) landlord's account

34)

35)

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C) rent account 36) Having placed in a Suspense account the difference in the trial balance, it is found that the difference arose because a pre-paid rent of £12 000 has been brought down as a credit balance in the Rent account. To correct this error which of the following entries should the journal require: A) Debit Suspense account and credit Rent account with £24 000

36)

B) Debit Rent account and credit Suspense account with £24 000 C) Debit Rent account and credit Suspense account with £12 000 D) Debit Rent account with £24 000 37)

A trial balance will not reveal the following error: A) a credit sale of £500 to Ashley debited to Ashley account only B)

C) D)

37)

a credit sale of £500 made to Ashley, posted as debit sale account £500 and credit Ashley account £500 a cash sale of £500 posted to sales account only a cash sale of £500 posted as a credit to the sales account of £500, and a credit to cash account of £500

38) M Biggs bought several lots of inventory (stock) throughout a period for the following amounts £1 100, £2 200, £3 300, £4 400. He made sales on credit throughout this period of £1 100, £2 200, £3 300, £4 400. He sells inventory (stock) at cost plus 25%. His closing inventory (stock) at the end of the period is valued at: A) 2 200 B) 3 300 C) zero D) 4 400

38)

39) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

39)

Interest account : £2 000 paid as interest on Dave's Loan A) credit B) debit 40) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Machinery a/c A) credit

40)

B) debit 41)

41) If the net assets of a business totalled £540 000 and its liabilities totalled £316 800, its total assets on that date would amount to:

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A) £223 200

B) £856 800

C) £633 600

D) £540 000

42) A 'T' account is: A) an abbreviation for the telephone account

42)

B) an account for all customers whose names begin with the letter T C)

the ledger account found between the Sugar account and the Milk account

D) a simple representation of a ledger account, forming the letter 'T' 43) Which of the following reflects the effects on the accounting equation of a payment to trade payables (creditors)?

A) assets decrease: liabilities decrease

43)

B) assets decrease: ownership interest decreases C) assets increase: liabilities decrease D) assets decrease: ownership interest increases 44) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Stationery account A) credit

B) debit

45) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Shop fittings a/c A) debit

45)

B) credit

46) For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter the dishonouring ('bouncing') of a cheque received from a customer S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) d

44)

B) c

Neither

e C) e

D) a

E) b

46)

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47) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Cash account A) debit

47)

B) credit

48) If a business pays a cheque for stationery, the bookkeeping entries are: A) Debit Purchases Credit Bank

48)

B) Debit Bank Credit Stationery C) Debit Stationery Credit Bank D) Debit inventory (stock) Credit Bank 49) The total of credit sales found within a sales ledger control account comes from: A) the sales day book B) the sales ledger C) the trial balance 50)

49)

D) the cash book

Which of the following events will an accountant normally not record?

A) paying a bill that has been owing for 2 years

50)

B) receiving an invoice for goods purchased, but not paying for them yet C) providing a service to a customer to be paid for in the next accounting period D) agreeing to hire a new employee who will start work in the next accounting period 51) Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Bank Loan a/c A) income C) expenditure

51)

B) asset D) liability

52) Before inserting a closing balance, accounts representing assets or expenses are likely to have: A) an equal amount of debit and credit entries B) only credit entries C) more debit entries than credit entries D) more credit entries than debit entries

52)

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53) For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter discount received from suppliers for early settlement of bills: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) b

B) a

Neither

e C) e

D) c

E) d

54) Which of the following is not a debit balance?

A) Taxation Paid B) Wages and Salaries C) Cost of Buildings 55)

54)

D) Capital Account

Which one of the following is an impersonal ledger?

A) receivables (debtors) ledger B) sales ledger C)

53)

D)

purchases ledger

55)

general ledger

56) A trader who commenced business on 1 January 20x5 reports the balances, as at 31 December 20x5, in the Purchases account and Sales account as £346 800 and £479 500 respectively. The total of the balances in all other expense accounts is £112 200. Identify the net profit in the first year of operation. The cost of goods remaining unsold by the year end was £54 400.

A) B) C) £24 600 £20 500 £74 900

56)

57) Identify the account to which you would post the following transaction recorded in the Cash Account:

57)

£40 paid to buy fuel for a business vehicle A) Motor Vehicles a/c B) vehicle running a/c C) depreciation account 58) For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter Credit purchases during the month: S.L.Cont.

P.L.Cont.

Neither

58) Cr Dr

Dr

Cr

a

c

d

b

e

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A) d

B) b

C) c

D) a

E) e

59) Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account: Sale of goods to customers. (Sales account) A) reduce B)

increase

60) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Van repairs account A) debit

59)

60)

B) credit 61)

61) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Capital account A) debit

B) credit

62)

62) Identify the account to which you would post the following transaction recorded in the Cash Account: £360 received from selling 12 units of mobile phone at £30 each A) earnings account B) mobile phone a/c C)

sales account

63)

63) A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Cost of goods removed by the owner for own use A) neither B) debit

C) credit

64) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

Sales account : £360 received from selling mobile phones A) credit B) debit

64)

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65) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

65)

Furniture account : £2 500 paid for a steel cabinet A) debit B) credit 66) A decrease in an asset will be recorded: A) on the debit side of the ledger account for the asset

66)

B) on the credit side of the ledger account for the asset C) on both sides of the ledger account for the asset D) nowhere in the ledger accounts 67)

The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

67)

Vehicle Running account : £40 paid to buy fuel for the business vehicle A) debit B) credit 68) For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter an extra general provision made for doubtful debts S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) a

B) e

68)

Neither

e C) c

D) d

E) b

69) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

69)

Rent account : £4 000 paid to Ricky Nelson as rent for business premises A) credit B) debit 70) 70) Double-entry bookkeeping recognises that every transaction has a dual aspect.

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A) False

B) True

71) Which one of the following statements is incorrect:

71)

Assets acquired by a business for continuous use should be depreciated in each year of its use so that: A) a portion of the cost of the asset is matched with the income it generates B) the assets may be reported at the amount each of them is worth C) resources for replacing the asset are retained within the business D) profits of the period and the position as at the end of each period is not exaggerated 72) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Buildings account A) credit

72)

B) debit

73) The balance in the Capital account represents: A) the total of all assets of the business

73)

B) total assets of the business minus its liabilities C) cash and any other assets introduced by the owner at the commencement of business D)

the amount of cash introduced by the owner at the commencement of business

74) Which of the following will disturb the balancing of the trial balance?

A) entering a wrong amount in a book of prime entry

74)

B) posting to an asset account instead of an expenditure account C) entering an acquisition of an asset, on credit terms, in the Purchases Day Book D) error in adding up a book of prime entry 75) How would you define the “net assets” of a business?

A) Total assets + liabilities B) Owner’s capital + Liabilities C) Total assets - Owner’s Capital D)

75)

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Liabilities

Total assets -

76) Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Staff Loan account A) asset C) liability

76)

B) expenditure D) income

77) Which one of the following statements is correct?

77)

A Trial balance: A) lists the balances in all the accounts on any day B)

will balance even if the bookkeeper forgets to post a payment

C) Lists the balances in the asset accounts and liability accounts on any day D) will reveal how profitable a business has been 78) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

Stationery account : £53 paid for various items of stationery A) credit B) debit 79)

78)

79)

In a trial balance produced at the end of a financial period, opening inventory (stock) is usually found: A) on the credit side B) as a note after the trial balance has been produced C) it is not shown at all D)

on the debit side

80)

80) Which of the following economic actions reduces the amount of ownership interest?

A) a payment of administration wages B) a receipt of cash from receivables (debtors) C) a receipt of a loan from the owner’s brother D) a payment of cash to trade payables (creditors) 81) Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account:

repay Part ment of

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Kingsley 81) Perera's Loan.

(Perera's Loan account) A) reduce

B) increase

82) Having placed in a Suspense account the difference in the trial balance, it is revealed that the difference arose because £12 500 received from customer Sally Peter has been posted to the debit of her account. To correct this error which of the following should the journal entry require: A) debit Suspense account and credit Sally Peter’s account with £12

82)

500 B) debit Sally Peter’s account and credit Cash account with £12 500 C) debit Suspense account and credit Sally Peter’s account with £25 000 D) debit Suspense account and credit Cash account with £12 500 83) Money paid into the bank account appears on the credit side of the bank account in the business's ledger.

A) False B) True

83)

84) Which one of the following statements is incorrect?

84)

According to the rules of double entry: A) a credit entry increases the balance in income and liability account B) a debit entry increases the balance in the assets and expenditure accounts C) a debit entry decreases or eliminates balances in income and liability accounts D) a debit entry increases the balance in the Capital account 85) Which of the following is not a book of prime entry?

A) the Ledger B) Returns Inwards Day Book C) the Petty Cash Book

85)

D) cash book

86) The accounting entries for recording £100 000 cash introduced by the owner of a business are: A) debit Cash account and Credit Owner’s account B) credit Cash account and Debit Investment in business account

86)

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C) debit Cash account and Credit Capital account D) debit Cash account and Credit Investments account 87) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

87)

Motor vehicles account : £26 500 paid for a Vovo Lorry for business use A) debit B) credit 88) £30 000 being part repayment of a loan and £12 000 being interest due on the loan have both been credited in the Cash Account. The corresponding debit should be: A) £42 000 in the relevant loan account

88)

B) £30 000 in the loan account C) £30 000 in the loan account and £12 000 in Interest on loan account D)

£18 000 in the loan account

89) Identify, whether the posting of the transaction to the account named would increase or reduce the balance in that account:

89)

Refund of cash to a customer who returned goods sold to him. (Sales account) A) reduce B) increase 90) The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance. Identify the impact on the trial balance of the following error:

90)

£6 000 paid as rent has been posted to the Rent account as £600.

A) debit excess of £5 400 B) trial balance balances C) debit short of £5 400 91)

91)

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Salaries account A) expenditure

B) liability

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C) asset

D) income

92) A sales control account balance which agrees with the total of the individual sales ledger balances tells us that: A) it is unlikely that there is a double entry error in the sales ledger

92)

B) no amounts arising from sales will appear in the bank reconciliation C) it is unlikely that there is a double entry error in the ledgers as a whole D) any remaining error in the double entry must lie in the purchase ledger 93)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter Credit sales during the month: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) d

Neither

e

B) a

C) b

D) c

E) e

94) A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Credit sales A) debit

93)

B)

C)

credit

94)

neither 95)

95) The following are business transactions of a retailer: Purchased 150 items at cost £4 each for cash.

Delivered 110 items to customers for cash at a selling price of £6.50 per item.

What is the total profit of the retailer?

A) £875 B) £440

C) £115

D) £275

96) Identify the account to which you would post the following transaction recorded in the Cash Account:

£80 d for 40 units 0 pai of

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mobile 96) phones to be sold in the normal course of business A) inventory (stock) account B) telephone account C) purchases account 97) Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000. During the year ending on 31 December 20x6 he paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses. He received £139 250 by sale of goods. Identify Jayantha’s profit for the year to 31 December 2001 in the following situation:

97)

Jayantha had sold out all goods purchased during the year and wishes to write off a tenth of the cost of furniture as depreciation.

A) £14 400 B) £46 850 C) £14 200 98) A trial balance is a list of: A) all the firm's assets and liabilities

98)

B) all the firm's receivables (debtors) and trade payables (creditors) C) all the debit and credit balances in the accounts D) all the transactions in a ledger 99) If a sales invoice for £98 500 is not recorded in the Sales Day Book, the effect of the error on the trial balance would be: A) the trial balance will balance B)

99)

total of the credit side will exceed that of the debit side by £98 500

C) total of the debit side will exceed that of the credit side by £98 500 D) total of the debit side will exceed that of the credit side by £197 000 100)

£52 875 (inclusive of Value Added Tax at 17.5%) paid for acquiring machinery, and credited to the Cash account should be posted to the debit of: A) Machinery account

100)

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B) £40 000 to Machinery account and £12 875 to Value Added Tax account C) £45 000 to Machinery account and £7 875 to Value Added Tax account D) Value Added Tax account 101)

A supermarket pays the wages of its staff by credit transfer from its bank account. The entries in the supermarket's accounts should be: A) Debit: Bank, Credit: Wages

101)

B) Debit: Wages, Credit: Staff creditors C) Debit: Wages, Credit: Bank D) Debit: Wages, Credit: Cash 102)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will Cash purchases during the month: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) e 103)

B) b

102)

Neither

e C) a

D) c

E) d

Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account:

103)

Owner took some cash for his personal needs. (Capital account) A) increase B) reduce 104)

105)

104) A bank reconciliation statement is required by the bank before granting an overdraft facility.

A) False B) True 105) A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Expense (telephone) A) neither

B) credit

C) debit

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106)

The sales and purchase ledgers are impersonal ledgers.

A) False B) True

106)

107)

Which of the following is not a credit balance?

A) Interest Received

107)

B)

Accumulated Depreciation of Fixtures and Fittings

C) Interest Paid D) Sales Income 108)

If a business buys stationery with a cheque it will debit the stationery account and credit the bank account in its own books.

A) False B) True

108)

109)

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure:

109)

Van repairs account A) Liability C) Income 110)

B)

Asset

D) Expenditure

Is an error of omission: A) a transaction where the credit entry is posted as a debit entry or

110)

vice versa B) a transaction that has been posted to the wrong ledger C) a transaction which has not been included in the total of the ledger it is posted in D) a transaction that has been completely overlooked 111)

The total of credit purchases found within a purchases ledger control account comes from: A) the trial balance B) the purchases day book C) the purchases ledger

112)

111)

D) the cash book

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Advertising a/c A) Expenditure

B) Liability

C) Income

D) Asset

112)

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113)

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Expense (stationery) A) neither

114)

B) debit

C) credit

A payable (creditor) account of £8 500 in the double entry system represents: A) an expense of the business B)

113)

114)

a liability of the business

C) an asset of the business D) an item of income to the business 115)

The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance. Identify the impact on the trial balance of the following error:

115)

Payment of £420 for stationery has not been entered anywhere in the system.

A) trial balance balances B) debit excess of £420 C) debit short of £420 116)

117)

116) A trader who commenced business on 1 January 20x5 reports the balances, as at 31 December 20x5, in the Purchases account and Sales account as £346 800 and £479 500 respectively. The total of the balances in all other expense accounts is £112 200. Identify the gross profit in the first year of operation. The cost of goods remaining unsold by the year end was £72 400 and, in addition, stationery which cost £500 remains unused.

A) £205 100 B) £187 100 C) £205 600 117) Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Machinery a/c A) Liability

B) Asset

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C) Income 118)

119)

D) Expenditure

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Stationery account A) Asset

B) Income

C) Expenditure

D) Liability

Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000. During the year ending on 31 December 20x6 he paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses. He received £139 250 by sale of goods. Identify Jayantha’s capital as at 31 December 2001 in the following situation:

118)

119)

Jayantha has drawn £2 000 in cash. The cost of goods held on 31 December 20x6 was £29 450 and furniture is to be written off evenly over twelve years.

A) £50 850 B) £52 850 C) £51 850 120)

120) The invoice for acquisition of a vehicle for £45 000 was entered in the Purchases Day book and the net profit for the year reported as £862 480.

How would this error affect the performance and position reported by the business: A) net profit for the year and the assets by year end will both be overstated B) net profit for the year and liability at year end will both be understated by £45 000 C) net profit for the year and asset by year end will both be understated D) net profit for the year and liability at year end will both be overstated by £45 000

121)

121) Which of the following accounts will you not normally find in the Nominal Ledger?

A) Cash account B) Purchases account C) Capital account

122)

D) Motor vehicles account 122)

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Sales account A) credit

B) debit

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123)

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Cash account A) Asset C) Liability

124)

123)

B) Expenditure D) Income

Which one of the following statements is incorrect?

A) balance sheet usually reports assets in the reverse order of

124)

liquidity B) net profit of a period is reported on the balance sheet as part of the owner’s capital C) owner's drawings should be reported in the Profit and Loss a/c as an expenditure D) the gross profit is the difference between sales and the cost of goods sold 125)

Which of the following statements is incorrect in relation to accounting for a supplier’s invoice when accounting for goods purchased on credit?

125)

A) post the amount of each invoice to the credit of Supplier's account B) debit Purchases account and credit Cash account C) enter particulars of the invoice in the Purchases Journal D) post the periodical total of all invoices to the debit of Purchases account 126)

Identify the balance that will appear on the bank statement as at 31 March 20x6 based on the following information:

126)

Cash book balance on 31.3.20x6 was £72 468; Deposits awaiting bank clearance on this date was £11 540 and cheques drawn but not presented to the bank for payment by this date was £28 780.

A) £72 468 B) £55 228 C) £89 708 127)

Which one of the following is a personal ledger?

A) Petty Cash Book B) General ledger C) Cash Book

128)

127)

D) receivables (debtors) ledger

When preparing a bank reconciliation statement, an 'unpresented cheque' is: A) a cheque received from a debtor but as yet unbanked

128)

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B) a cheque which the bank has returned due to lack of funds C) a cheque sent to a creditor but as yet unbanked D) a cheque which has not been signed 129)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter cheques received from credit customers : S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) 130)

d

129)

Neither

e

B) b

C) c

D) a

E) e

The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

130)

Capital account : £100 000 received as capital from the owner A) credit B) debit 131)

Double entry accounting reflects: A) the accruals concept C)

132)

B) the matching concept D)

the prudence concept

the duality concept

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Credit purchases A) credit

133)

131)

B) neither

C) debit

Which of the following economic actions decreases the amount of current assets?

A) a purchase of equipment, for cash B) a payment for rent in advance of occupancy of the property C) a receipt of cash, from receivables (debtors) D)

132)

133)

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a purchase of 134)

equipment, on credit

If the net assets of a business totalled £200 000 and its total assets on that date amounted to £325 000, its liabilities would amount to: A) not sufficient information to calculate

134)

B) £200 000 C) £125 000 D) £525 000 135)

The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance. Identify the impact on the trial balance of the following error:

135)

£2 000 paid to Rick Maybury in part settlement of a loan has been posted to the credit of Rick Maybury's Loan account A) trial balance balances B) debit short of £4 000 C) debit short of £2 000 136)

Identify the balance that will appear on the bank statement as at 31 March 20x6 based on the following information:

136)

Cash book balance on 31.3.20x6 was £28 640; Deposits not cleared until then was £45 248 and cheques yet to be presented to the bank as at that date £11 250.

A) £5 358 overdrawn B) £62 638 C) £28 640 137)

137) The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

Salaries account : £2 000 paid as salary to shop manager A) debit B) credit awai and

138)

Identify the balance that will appear on the bank statement as at 31 March 20x6 based on the following information: Cash book reports as at 31.3.20x6 a bank overdraft of £32 840; Deposits

ting chequ clear es yet ance to be

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presente 138) d, on this date, amount to £22 540 and £54 975 respectiv ely.

A) £32 840 o/d 139)

_

B) £405

C) £65 275 o/d

Identify the account to which you would post the following transaction recorded in the Cash Account:

139)

Payment of £15 for a Cash Book, £20 for a Ledger and £18 for some writing material.

A) stationery account B)

miscellaneous account

C) writing material a/c 140)

The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance. Identify the impact on the trial balance of the following error:

140)

£1 500 received on sale of goods has not been posted the Sales account.

A) Trial balance balances B) debit short of £1 500 C) credit short of 1 500 141)

141) Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Purchases a/c A) credit

B) debit 142)

142)

An amount paid in part settlement of a supplier's balance is accounted for as: A) debit Supplier's personal account and credit Capital account B) debit Cash account and credit Supplier's personal account C) debit Part payment account and credit cash account

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D) debit Supplier's personal account and credit Cash account 143)

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Staff Loan account A) debit

144)

145)

B) credit

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter Cash sales in the month: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) a

B) e

144)

Neither

e C) b

D) d

E) c 145)

The inventory (stock) Account only shows the entries for opening and closing inventory (stock) and their transfers to Profit and Loss Account.

A) False

146)

143)

B) True 146)

Birdland made a cash purchase of bird cages for re-sale. Which of the following is correct?

A) there will be no effect on the total assets of the business B) there will be an increase in the Total assets of the business C) total assets of the business would increase D) owner's Capital will decrease

147)

147) Identify the account to which you would post the following transaction recorded in the Cash Account: £25 000 received as a loan, at 8% per annum interest, from Dave Nicholas, a friend of the owner.

A) Dave Nicholas's gift account B) Capital account C) Dave Nicholas's Loan a/c

148)

The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If

this fails syste the m failur

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e is 148) flagged up by a differenc e arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance.

Identify the impact on the trial balance of the followin g error:

_

£360 paid for stationer y (for office use) has been posted to the debit of Purchase s account.

A) debit excess of £360 B) trial balance balances C) 149)

debit short of £360

Purchase returns are shown on the credit side of the purchases control account.

A)

149)

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B)

False

150)

Tr ue

If a sales invoice for £72 500 is recorded in the Sales Day Book as £7 250 the effect of the error on the trial balance will be: A) the trial balance will balance

150)

B) total of the debit side will exceed that of the credit side by £65 250 C) total of the credit side will exceed that of the debit side by £72 500 D) total of the debit side will exceed that of the credit side by £72 500 151)

The correct double entry to record closing inventory (stock) in the accounts of a sole trader is: A) debit inventory (stock) account, credit sales account B) C) D)

152)

debit inventory (stock) account, credit income statement debit inventory (stock) account, credit purchases account credit inventory (stock) account, debit income statement

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Shop fittings a/c A) Income C)

153)

152)

B) Asset D)

Liability

Expenditure

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter discount allowed to customers for early settlement of bills: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) b 154)

151)

B) d

153)

Neither

e C) e

D) a

E) c 154)

The correct way of accounting for an amount received from a credit customer is: A) debit Cash account and credit Sales account B)

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account and debit the individual customer’s account

credit Cash

C) debit Cash account and credit Capital account D) debit Cash account and credit the individual customer’s account 155)

The owner of a business transferred her private car into the business for use by her staff. The effect of this transaction would be: A) decrease assets and decrease liabilities

155)

B) increase assets and increase liabilities C) decrease Owner’s capital and increase assets D) increase Owner’s capital and increase assets 156)

The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the Bookkeeper.

156)

Dave’s Loan account : £25 000 received as a loan at 8% interest per annum A) credit B) debit 157)

An alternative name for a control account is: A) sales account B) summary account C) purchases account

158)

D) total account

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter the following items: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

157)

158)

Neither

e

Sum of amounts receivable from customers at commencement of a month A) b B) d C) c D) a E) e 159)

After the financial statements for the year have been prepared it is discovered that some Credit Notes issued by suppliers have not been accounted for. The effect of this error is: A) profit for the year as well as payables (creditors) have been overstated

159)

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B) profit for the year as well as trade payables (creditors) have been understated C) profit is not affected but payables (creditors) have been overstated D) profit has been understated and the payables (creditors) overstated 160)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter Returns inwards during the month: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) a 161)

B) d

160)

Neither

e C) c

D) e

E) b

Which of the following reflects the effect on the accounting equation of the customer accepting the finished goods with a commitment to pay for them in one month's time?

A) assets increase: ownership interest increases

161)

B) assets decrease: ownership interest increases C) assets increase: ownership interest decreases D) 162)

assets decrease: ownership interest decreases

Identify the year-end balance that would be brought down in the following account on 31 December 20x6, taking into account the stated transaction:

162)

Advertising account: Payments made during the year for advertising were £412.00, £278.50, £395.75 and £175.50.

A) £186 25 B) £849.75 C) £1 261.75 163)

163) Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account: Recovery of money from supplier by returning goods purchased.

(Purchases account) A) increase B) reduce 164)

164)

Which of the following statements is incorrect?Business entities systematically record their receipts and payments in a Cash Account and balance it on a daily basis because:

Full file at http://testbankscafe.eu/Test-Bank-for-Financial-and-Management-Accounting-An-Introduction-4th-Edition-Pauline-Weetman

A) of the desirability of maintaining an accurate chronological record of transactions B) of the need to protect cash from defalcation C) of the desire to find how rich they have become D) of the need to continuously assess whether they have enough cash to meet their commitments 165)

A trader who commenced business on 1 January 20x5 reports the balances, as at 31 December 20x5, in the Purchases account and Sales account as £346 800 and £479 500 respectively. The total of the balances in all other expense accounts is £112 200. Identify the gross profit in the first year of operation. The cost of goods remaining unsold by the year end was £54 400.

A) £187 100 B) £132 700 C) £78 300

165)

166)

If a supplier's invoice for £112 000 is posted to the Supplier’s account as £12 000, the effect on the trial balance would be: A) total of the credit side will exceed that of the debit side by £100 000

166)

B) total of the debit side will exceed that of the credit side by £112 000 C) total of the debit side will exceed that of the credit side by £100 000 D) the trial balance will balance 167)

The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance. Identify the impact on the trial balance of the following error:

167)

Interest of £500 paid in respect of Rick Maybury's loan has been posted to Rick Maybury's Loan account.

A) debit excess of £500 B) trial balance balances C) debit short of £500 168)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will

enter of a a debt reco writte very n off

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in the 168) previous month:

_

S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) b 169)

170)

Neither

e B) c

C) d

D) a

E) e

The word Debit is often abbreviated to Dr. A) True B) False Rent received in advance should be reported in the balance sheet as part of: A) long term liability (payables (creditors) payable after more than

169)

170)

twelve months) B) current liabilities (trade payables (creditors) payable within twelve months) C)

current assets

D) owner's capital 171)

A trader who commenced business on 1 January 20x5 reports the balances, as at 31 December 20x5, in the Purchases account and Sales account as £346 800 and £479 500 respectively. The total of the balances in all other expense accounts is £112 200. Identify the net profit in the first year of operation. The cost of goods remaining unsold by the year end was £72 400 and, in addition, stationery which cost £500 remains unused.

A) £93 000 B) £93 400 C) £92 900

171)

172)

If a business commenced the day with £3 400 in hand, receives and pays out £42 800 and £44 200 respectively during the day, cash remaining by the end of the day would be: A) £46 200 B) £1 400 C) £4 800 D) £2 000

172)

173)

Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account:

173)

Payment of interest to Kingsley Perera, on a loan received. (Interest account) A) increase B) reduce 174)

'Purchases' only refers to goods bought for resale, not to expenses.

A)

174)

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B)

False

Tr ue

175)

If Hogarth's sales for the week totalled £27 480, opening receivables (debtors) were £1 868 and closing receivables (debtors) were £1 276, Hogarth's business has increased its cash balance by: A) B) C) D) £26 888 £29 348 £26 204 £2872

175)

176)

The journal entry to account for the acquisition on credit of factory machinery from City Traders Ltd should require which of the following: A) debit Machinery account and credit City Traders Ltd account

176)

B) debit Factory account and credit City Traders Ltd account C)

debit City Traders Ltd account and credit Machinery account

D) debit Machinery account and credit Cash account 177)

Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account:

177)

Additional capital received from the owner of the shop (Capital account) A) reduce 178)

B) increase 178)

The following are business transactions of a retailer: Purchased 150 items at cost £4 each for cash.

Delivered 110 items to customers for cash at a selling price of £6.50 per item.

What is the value of the closing inventory (stock) of the retailer?

A) Nil B) £440 C) £160 D) £275

179)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter legal expenses recoverable from a customer in default: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) a 180)

B) d

179)

Neither

e C) b

D) c

E) e

If, as at the year end, the total assets of a business were £189 000 and

busi liabili ness ties

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were 180) £126 000, what would be the owner's capital as at that date?

A) £63 000 181)

_

B) £189 000

C) £315 000

D) £126 000

A supermarket purchases food items for resale on credit from a supplier, Goldman Ltd. The entries in the supermarket's accounts should be: A) Debit: Goldman Ltd, Credit: Sales

181)

B) Debit: Purchases, Credit: Goldman Ltd C) Debit: Goldman Ltd, Credit: Purchases D)

Debit: Purchases, Credit: Cash 182)

182)

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Entertainment expenses A) credit

183)

B) debit

183)

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Acquisition of office equipment A) debit B) neither

184)

C) neither

C) credit

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter an amount recoverable from a supplier who allowed a cash discount after his original invoice had been settled in full this month: S.L.Cont.

P.L.Cont.

Dr

Dr

Cr

Cr

Neither

a 184)bi

c

d

e

Full file at http://testbankscafe.eu/Test-Bank-for-Financial-and-Management-Accounting-An-Introduction-4th-Edition-Pauline-Weetman

A) b

B) e

C) a

185) 185) Trial balance Capital account Motor vehicles a/c Purchases account Sales account Salaries account Other expenses a/c Cash account

D) d

E) c

Debit

Credit

20 000 112 000 22 000 48 000 202 000

50 000 186 000 34 000 270 000

185)

A trader, who commenced business in the year, extracted the above trial balance on the last day of the first month and found that it failed to balance. Which of the following would explain the failure?

A) the trial balance fails to include one or more account balances B)

salaries, an expenditure, has been stated in error as a credit balance

C) a payment has been completely omitted D) motor fuel has been debited to Vehicles account 186)

A supermarket buys a motor van on credit from Park Motors Ltd. The entries in the supermarket’s accounts should be: A) Debit: Purchases, Credit: Bank

186)

B) Debit: Motor Van, Credit: Park Motors Ltd C) Debit: Park Motors Ltd, Credit: Motor Van D) Debit: Purchases, Credit: Park Motors Ltd 187)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter Bad debts written off during the month: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) c 188)

B) b

187)

Neither

e C) e

D) a

E) d

The Cashier has recorded the following transaction in a Cash Book, entering the receipts on the debit side and the payments on the credit side. Identify which side of the named account would be posted by the

Book keep Purch er.

ases

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account : 188) £800 paid to buy mobile telephon es for sale A) debit 189)

B) credit

A detailed record of the changes that have occurred during an accounting period in any individual asset or liability will be found in: A) cash book B) a Balance Sheet C) an account

190)

_

189)

D) trial balance

The double entry system requires that every transaction recorded by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved. If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance. Identify the impact on the trial balance of the following error:

190)

When totalling the Advertising account its total has been stated as £14 500 instead of £19 500.

A) trial balance balances B) debit short of £19 500 C) 191)

debit short of £5 000

Identify the account to which you would post the following transaction recorded in the Cash Account:

191)

£2 000 paid as salary to the Shop Manager A) Shop Manager's a/c B) Expense account C) Salaries account 192)

Which one of the following statements is incorrect?

A) net profit is gross profit less all expenses other than those included in Trading a/c B) gross profit is the difference between purchases and sales C) carriage inwards is included in the Trading account as part of cost of sales

192)

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D) carriage outwards is shown in the Profit and Loss as a deduction from gross profit 193)

Identify the year-end balance that would be brought down in the following account on 31 December 20x6, taking into account the stated transaction:

193)

Chris Star Loan account: A loan of £100 000 was obtained from Chris, at 6% interest per year, on 1 July 20x5, repayable in full in three years' time. On 30 June 20x6 Chris was paid £6 000 as interest.

A) £100 000 B) £94 000 C) £106 000 194)

194) Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000. During the year ending on 31 December 20x6 he paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses. He received £139 250 by sale of goods. Identify Jayantha’s profit for the year to 31 December 2001 in the following situation: Jayantha has drawn £2 000 in cash. The cost of goods held on 31 December 20x6 was £29 450 and furniture is to be written off evenly over twelve years.

A) £42 850 B) £43 850 C) £76 300

195)

195) A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Cash purchases A) debit

196)

196)

D) expenditure

The Capital account in the Ledger records.

A) an Expenditure B) an asset C) a liability

198)

C) neither

A cash payment expected to bring benefit to a business in a future period is known as A) B) asset liability C) capital

197)

B) credit

197)

D) an income

If a credit sale of £15 400 to Peter Smith had been entered in the Sales Day Book as £14 500, the journal entry for correcting the error should require which of the following: A) debit Sales account and credit Peter Smith’s account with £900

198)

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B) debit Peter Smith’s account and credit Sales account with £900 C) debit Cash account and credit Sales account with £900 D) debit Peter Smith’s account and credit Cash account with £15 400 199)

199)

A supermarket pays a supplier, Goldman Ltd, the amounts owed in cash. The entries in the supermarket's accounts should be: A) Debit: Cash, Credit: Purchases B) Debit: Cash, Credit: Goldman Ltd C) Debit: Goldman Ltd, Credit: Cash D) Debit: Purchases, Credit: Cash

200)

Which of the following transactions would cause £50 000 increase in both total assets and total liabilities of a business: A) acquisition of a computer for office use for £50 000 on credit terms

200)

B) payment of £50 000 in part settlement of a loan obtained by the business C) collection in full of a debt of £50 000 due to the business D) payment of staff salary of £50 000 201)

Given that opening receivables (debtors) are £12500, sales invoices £64800, sales credits £2500, and receipts from receivables (debtors) amounted to £62900, closing receivables (debtors) should total?

A) £11900 B) £13100 C) £16900 D) £1900

201)

202)

If an account has debit entries totalling £600 and credit entries totalling £500, its closing balance is said to be: A) a debit balance of £100 B) a credit balance of £100

202)

C) a debit balance of £1 100 203)

D) a credit balance of £1 100

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter payments made to suppliers : S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A)

d

Neither

e B) a

C)

e

D)

203)

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c

E) 204)

b

Which of the following will not increase an owner's capital account?

A) capital introduced

204)

B) Owner's Drawings C) Net Profit D) a lottery win paid into the business by the owner 205)

In a trial balance produced at the end of a financial period, closing inventory (stock) is usually found: A) it is not shown at all

205)

B) on the credit side C) on the debit side D) 206)

as a note after the trial balance has been produced

Which of the following summarizes the accounting equation: A) Assets = Liabilities - Owner's Capital

206)

B) Liabilities = Assets + Owner's capital C) Assets - Liabilities = Owner's Capital D) Owner’s Capital = Assets + Liabilities 207)

An invoice for £16 500 from Kensington Traders, for goods purchased for sale, has not been posted to the supplier's account. The difference in the trial balance has been placed in a Suspense account. A journal entry requiring which of the following is needed for correcting this error.

A) debit Purchases account and credit Kensington Traders with £33

207)

000 B) debit Suspense account and credit Kensington Traders with £16 500 C) debit Purchases account and credit Kensington Traders with £16 500 D) debit Kensington Traders and credit Suspense account with £16 500 208)

The invoice relating to the acquisition on credit of Office Equipment for £24 500 from Globe Ltd was entered in the Purchases Journal. To correct this error, which of the following needs to be done?

A) journal entry: Debit Office Equipment a/c and credit Purchases a/c with £24 500

208)

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B) journal entry: Debit Office Equipment a/c and credit Globe Ltd a/c with £24 500 C) journal entry: Debit Globe Ltd a/c and credit Office Equipment a/c with £24 500 D) no journal entry is needed 209)

210)

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Motor Van a/c A) Expenditure

B) Liability

C) Income

D) Asset

209)

210) Which of the following economic actions increases the amount of ownership interest?

A) the provision of a service to a customer, on credit B) C)

a payment for a motor vehicle a purchase of raw material, on credit

D) a payment to trade payables (creditors) 211)

Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account:

211)

Recovery of the cost of a personal call made by an employee.

(Telephone account) A) increase B) reduce 212)

212) If a business buys goods for resale on credit terms from XYZ, the bookkeeping entries are: A) debit inventory (stock) Credit XYZ's account B) debit Purchases Credit XYZ's account C) debit XYZ's account Credit Purchases D) debit Bank Credit XYZ's account

213)

213) Before inserting a closing balance, accounts representing liabilities, capital or income are likely to have: A) more credit entries than debit entries B) more debit entries than credit entries C) only credit entries D)

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an equal

amount of debit and credit entries

214)

An unpresented cheque is one which has not yet appeared on the bank statement.

A) False B) True

214)

215)

Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000. During the year ending on 31 December 20x6 he paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses. He received £139 250 by sale of goods. Identify Jayantha’s capital as at 31 December 2001 in the following situation:

215)

Unsold goods remaining in hand on 31 December 20x6 had cost £24 550 and Jayantha wishes to write off the cost of his furniture equally over six years.

A) £48 950 B) £36 950 C) £47 950 216)

Which one of the following statements is correct:

216)

Where accounting records are maintained on an accruals basis: A) expenditure should be accounted for only to the extent it has been paid for B) income should be accounted for only when received C) income should be accounted on accruals basis and expenditure on payments basis D) income and expenditure relating to the accounting period should be fully accounted for even if income is still to be received and expenditure is yet to be paid for 217)

217) A payment of £15 000 has been posted to Jerry Blake's loan account, whereas £3 000 of this amount was paid as interest on the loan. To correct this error the journal entry would require which of the following: A) debit Interest on loan account and credit Jerry Blake's Loan a/c with £3 000 B) debit Cash account and credit Jerry Blake's Loan a/c with £3 000 C) debit Jerry Blake's loan a/c and credit Interest on loan account with £3 000 D) debit Interest on loan account and credit Jerry Blake's loan a/c with £15 000

218)

218) Which of the following statements is correct: If a business acquires a vehicle for £36 000, making a down payment of £15 000 and undertaking to pay the remainder in six monthly instalments: A)

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net assets will not change B) net assets will decrease by £21 000 C) net assets will increase by £21 000 D) net assets will increase by £36 000 219)

An accounting period is: A) the period between commencement of business and the day it

219)

closes down B) the calendar year consisting of 365 days C) successive periods of twelve months commencing from the day the business started D) a regular period in terms of which a business opts to report its performance and position 220)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter the sum of amounts owed to all suppliers at commencement of a month: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

A) 221)

e

B) b

220)

Neither

e C) d

D) c

E) a

B/d and c/d stand for: A) beginning date and closing date

221)

B) bank divided by receivables (debtors) and payables (creditors) divided by receivables (debtors) C) brought down and carried down D) balance down and carried down 222)

Accounting entries for recording payment of a telephone bill are: A) debit Cash account and Credit Telephone account B)

credit Cash Account and Debit Telephone expenses account

C) debit Capital and Credit Cash D) credit Cash account and Debit Office Equipment account

222)

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223)

If a sole trader operating as a florist purchases a van for £19 500 for business use, paying by cheque, when completing his double entry accounts, he will: A) credit van account and debit bank account

223)

B) debit van account and credit cash account C) debit purchases account and credit bank account D) debit van account and credit bank account 224)

When attempting to identify accounting errors the trial balance can be relied on to detect which of the following errors?

A) posting to the wrong side of any account

224)

B) amounts posted to the correct side of a wrong account C)

transactions not accounted for

D) all accounting errors 225)

Identify the account to which you would post the following transaction recorded in the Cash Account:

225)

£100 000 received as capital from Pam Saunter, the owner of the shop.

A) Investment account B) Capital account C) Owner’s account 226)

Which of the following statements is incorrect in relation to accounting for a Credit Note received from a supplier?

A) enter the particulars in a Purchases Returns Day Book

226)

B) post the amount on the Credit Note to the debit of the supplier’s personal account C)

debit the amount of the Credit Note to the Purchases account

D) post periodical total of amounts on Credit Notes to the credit of Returns Outwards a/c 227)

Identify the year-end balance that would be brought down in the following account on 31 December 20x6, taking into account the stated transaction: Sales account: Sales made until 1 December 20x6 were £208 450. Sales in December were £54 250. £4 250 was refunded in December to a customer who returned the goods sold to him in November.

A) £158 450 B) £262 700 C) £258 450

227)

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228)

A new business purchased goods for £117 000 and sold 80% of them for £240 000. Its gross profit for the period is: A) £75 000 B) £146 400 C) £123 000 D) £240 000

228)

229)

The journal is the same as a ledger.

A) True

229)

230)

B) False

If an amount paid for servicing vehicles has been posted in error to Motor Vehicles account the journal entry necessary to correct this error should require which of the following: A) debit Motor vehicles account and credit Vehicle maintenance

230)

account B)

debit Vehicle maintenance account and credit Cash account

C) debit Cash account and credit Motor vehicles account D) debit Vehicle maintenance account and credit Motor Vehicles account 231)

The following are business transactions of a retailer:

231)

Purchased 150 items at cost £4 each for cash.

Delivered 110 items to customers for cash at a selling price of £6.50 per item.

What is the total 'cost of goods sold' for the retailer?

A) £440 B) £600 C) £715 232)

D) £875

When an owner takes out money or goods for his or her own use, it is called 'drawings'.

A) False B) True

232)

233)

In a sales control account, the final balance should equal all the individual balances on the trade payables (creditors)' ledger.

A) B) False True

233)

234)

For the purpose of establishing the accuracy of the individual personal ledger balances, a business maintains, on a memorandum basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont). Identify the account and its side in which you will enter an amount owed to a customer because, in the previous month he had returned goods after settling the full amount receivable from him: S.L.Cont.

P.L.Cont.

Dr

Cr

Dr

Cr

a

b

c

d

Neither

e

234)

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A) e 235)

B) c

C) b

D) a

E) d

Prepaid expenses require an adjustment to be made to the double entry accounts as follows: A) debit relevant expense account with prepayment before balancing

235)

off account; credit income statement B) credit relevant expense account with prepayment before balancing off account; debit income statement C) credit relevant expense account with prepayment before balancing off account; debit prepayment to same account after balancing off D)

236)

debit relevant expense account with prepayment before balancing off account; credit prepayment to same account after balancing off

An alternative name for a total account is: A) purchases account B) sales account C) control account

237)

238)

C)

Asset

237)

B) credit

Identify whether the account stated below would represent an Asset, Liability, Income or Expenditure: Depreciation account A) Income

239)

D) summary account

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account.

Motor Van a/c A) debit

236)

238)

B) Expenditure D)

Liability 239)

Which of the following statements is incorrect?

To keep proper control of the cash held by a business: A) every entry in the Cash account should be substantiated by an appropriate voucher B) difference between amounts received and paid should agree with amount in hand C) every receipt and payment of cash should be recorded as soon as it happens

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D) the cash book entries should be in pencil so that any mistakes can be corrected 240)

The cash book is simply the combination of the cash account and bank account in one book.

A) True B) False

240)

241)

If a business sells goods for resale on credit terms to ABC, the bookkeeping entries are: A) debit inventory (stock) Credit ABC's account

241)

B) debit Sales Credit ABC's account C) debit ABC's account Credit Sales D) debit Bank Credit ABC’s account 242)

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the "input tax" calculated at 17.5 / 117.5 of the transaction value. In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT account or do neither: Acquisition of machinery A) debit B) credit

243)

242)

C) neither

Is an error of principle: A) a transaction that is not recorded in accordance with the

243)

Companies Acts B) a transaction that is not recorded in accordance with the Accounting Standards C) a transaction recorded in the wrong type of account D) a transaction posted on the opposite side of an account 244)

Which of the following should be the first action when making a prime entry for a transaction?

A) enter the transaction in the appropriate book of prime entry

244)

B) post the transactions to the appropriate Ledger accounts C) decide on the Ledger account to be debited and the one to be credited D) study the voucher to identify the nature of the transaction 245)

The Sales Day book's daily total has been ascertained as £312 400

wher shoul eas it d

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have 245) been £422 400.

The effect of this error on the trial balance would be: A) the trial balance will balance

_

B) total of the credit side of the trial balance will exceed that of the debit side by £220 000 C) total of the debit side of the trial balance will exceed that of the credit side by £110 000 D) total of the credit side of trial balance will exceed that of the debit side by £110 000 246)

246)

An advantage of maintaining daybooks is: A) fewer entries are made into the general ledger B) fewer invoices need to be entered C) fewer payments need to be made D) no entries need be made into the ledgers

247)

£2 400 paid for staff training has been posted in error to the Advertising account. Which of the following would be an appropriate description of this accounting error: A) error of principle B) error of commission C)

248)

double entry error

D)

247)

error of omission 248)

The following are business transactions of a retailer: Purchased 150 items at cost £4 each for cash.

Delivered 110 items to customers for cash at a selling price of £6.50 per item.

What is the amount of total sales of the retailer?

A) £715 B) £600 C) £440

249)

D) £875

The list of balances in all the accounts remaining after nominal accounts have been closed by transfer of their balances to the Profit and Loss account is called: A)

249)

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B)

statement of Affairs

C) the balance sheet 250)

th e Li st of ba la nc es D) the Trial balance

Identify whether the posting of the transaction to the account named would increase or reduce the balance in that account: Acquisition of a vehicle for business use. (Motor vehicle account) A) increase B) reduce

250)

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1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24) 25) 26) 27) 28) 29) 30) 31) 32) 33) 34) 35) 36) 37) 38) 39) 40) 41) 42) 43) 44) 45) 46) 47) 48) 49) 50) 51)

B B C B A A D A A D D B C B B B A B A A B D A B A A A B B C B A B B C B B A B B B D A B A D A C A D D

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52) 53) 54) 55) 56) 57) 58) 59) 60) 61) 62) 63) 64) 65) 66) 67) 68) 69) 70) 71) 72) 73) 74) 75) 76) 77) 78) 79) 80) 81) 82) 83) 84) 85) 86) 87) 88) 89) 90) 91) 92) 93) 94) 95) 96) 97) 98) 99) 100) 101) 102)

C D D D C B A B A B C C A A B A B B B B B B D D A A B D A A C A D A C A C A C A A B B D C C C A C C A

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103) B 104) A 105) C 106) A 107) C 108) B 109) D 110) D 111) B 112) A 113) B 114) B 115) A 116) A 117) B 118) C 119) C 120) C 121) A 122) A 123) A 124) C 125) B 126) C 127) D 128) C 129) B 130) A 131) D 132) C 133) A 134) C 135) B 136) A 137) A 138) B 139) A 140) C 141) B 142) D 143) A 144) B 145) B 146) A 147) C 148) B 149) A 150) A 151) B 152) B 153) A

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154) D 155) D 156) A 157) D 158) D 159) D 160) E 161) A 162) C 163) B 164) C 165) A 166) C 167) B 168) E 169) A 170) B 171) B 172) D 173) A 174) B 175) D 176) A 177) B 178) C 179) A 180) A 181) B 182) C 183) A 184) E 185) B 186) B 187) B 188) A 189) C 190) C 191) C 192) B 193) A 194) B 195) A 196) A 197) C 198) B 199) C 200) A 201) A 202) A 203) D 204) B

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205) D 206) C 207) B 208) A 209) D 210) A 211) B 212) B 213) A 214) B 215) C 216) D 217) A 218) A 219) D 220) C 221) C 222) B 223) D 224) A 225) B 226) C 227) C 228) B 229) B 230) D 231) A 232) B 233) A 234) C 235) C 236) C 237) A 238) B 239) D 240) A 241) C 242) A 243) C 244) D 245) C 246) A 247) B 248) A 249) C 250) A