Penetration pricing and predatory pricing

1. Describe how markup pricing is done.

2. Compare and contrast penetration pricing and predatory pricing.

3. Compare and contrast skimming pricing and price gouging.

Mr. Ed, the manager of Stick Horses Manufacturing, wants to treat all depreciation as a product cost arguing that without the buildings (administrative as well as manufacturing), the company could not produce the product; therefore, depreciation on administrative facilities should be treated as a product cost and allocated to the production process and thereby cost of goods sold. He further argues that it makes no difference in the long run, a cost is a cost and all costs end up on the income statement. Do you agree with his argument? Why or why not?


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