Penetration Pricing Involves Setting Prices in Uneven Dollar Amounts

question 265

Short Answer

Penetration pricing involves
setting prices in uneven dollar amounts.
setting an initial low price to establish a new product in the market.
taking advantage of the fact that consumers do not always respond rationally to stated prices.
setting an initial high price to cover new product costs and generate a profit.
setting a limited number of prices for certain categories of products.

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Definitions:

Customizing

The process of making or altering something according to the user's specific needs or preferences.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including but not limited to utilities, maintenance, and salaries of non-direct labor.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to individual products or job orders based on a predetermined formula.

Machine-Hours

The quantity of time machines are in operation, regarded as a factor in production cost calculations.