Which of the Following Is True of FOB-Origin Pricing

question 12

Multiple Choice

Which of the following is true of FOB-origin pricing?

• A) It is a strategy in which the company charges the same price plus freight to all customers.
• B) It is a costly option for customers who are located near the company.
• C) It charges all customers the freight cost from a base city to the customer location.
• D) It is an expensive alternative for customers in distant locations.
• E) It is a strategy in which the seller absorbs all or part of the freight charges.

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Definitions:

Fixed Costs

Costs that do not change with the level of output or sales, such as rent, salaries, and insurance premiums, over a specified period.

Revenue

The total amount of money received by a company for goods sold or services provided during a specific period.

Effective Capacity

The capacity a firm can expect to achieve, given its product mix, methods of scheduling, maintenance, and standards of quality.

Operating Constraints

Limitations or restrictions that affect the performance or output of a process or system.