A Penetration Price Strategy Is Most Practical When There Exists

question 88

True/False

A penetration price strategy is most practical when there exists little threat of short-term competition in the market or when startup costs must be recovered rapidly.

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Definitions:

Variable Administrative Expense

Indirect costs that change in proportion with the level of a company’s production or sales activities.

Fixed Administrative Expense

Expenses that do not change with the level of production or sales over a certain period, related to the administration of a business.

Contribution Format

An income statement format that separates fixed and variable costs to show the contribution margin.

Contribution Format

A type of income statement that separates variable costs from fixed costs, highlighting the contribution margin.