Which of the Following Statements Is True of Penetration Pricing

question 25

Multiple Choice

Which of the following statements is true of penetration pricing?

• A)Penetration pricing makes sense only in categories that have a significant group of consumers who would be willing to pay a premium.
• B)Penetration pricing involves increasing product prices to target upscale consumers.
• C)A company using the strategy of penetration pricing makes a huge profit from the sheer volume of sales.
• D)A company using the strategy of penetration pricing gains a very high profit on each individual sale.

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Definitions:

Finished Goods Inventory

Manufactured products that are complete and ready for sale, recorded as an asset on the balance sheet until sold.

Raw Materials Inventory

The total cost of all the components and materials held by a company that are eventually used in the production process.

Gross Margin

The difference between the revenue earned from sales and the cost of goods sold, indicating the profitability from the core business activities before administrative and other expenses.

Merchandise Purchases

Transactions involving the buying of goods for sale, typically in a retail or wholesale business setting.