1. Consider the following statements about why prices are often based on product costs:

1. Companies sell many products and services, and cost based approaches provide a simple and direct pricing method.
2. The cost of a product or service provides an upper limit above which price shot not be set in the long run.
3. Determining a companys demand and marginal revenue curves is unnecessary.

Which of the above statements is (are) true?

1. I, II, and III
2. I and III
3. III only
4. II and III
5. I only

2. Which of the following terms describes a pricing strategy in which a new products initial price is set high and then eventually lowered to appeal to a broader range of customers?
   1. Penetration pricing
   2. Market-share pricing
   3. Designed pricing
   4. Price skimming
   5. Customer Pricing

3. Consider the following cots and decision-making decisions:
   1. The original cost of existing inventory, in a keep vs. dispose of decision
   2. The cost of new special electrical wiring needed in an equipment acquisition decision.
   3. The salary of a supervisor who will be transferred elsewhere in the organization, in a department-closure decision.

Which of the above costs is (are) irrelevant to the decision situation noted?

1. I and II
2. III only
3. I only
4. I and III
5. II only

4. All of the following actions are likely to increase ROI expect:
   1. A decrease in a companys invested capital
   2. An increase in sales price without a decrease in the number of units sold
   3. An increase in sales revenues
   4. An increase in operating expense
   5. An improvement in manufacturing efficiency