Central Ice Machine Company is located in Omaha, Nebraska, sells Frick, Sullair, York, and Fes Fuller ammonia refrigeration parts. The company ships using FOB origin pricing. Which of the following statements about the shipment of a Frick reciprocating compressor is true?
A)A buyer in Albany, New York, will pay significantly more shipping charges than a buyer in Lincoln, Nebraska, and Central Ice Machine will pay none.
B)Central Ice Machine pays the same amount as the buyer no matter where the compressor is shipped.
C)It will cost Central Ice Machine more to ship to Charlotte, North Carolina than to Topeka, Kansas.
D)All buyers will pay no shipping costs because they are paid by Central Ice Machine.

Question

Quizplus · Accepted Answer

FOB origin pricing means that the buyer is responsible for shipping costs from the point of origin, which in this case is Omaha, Nebraska. Therefore, a buyer in Albany, New York, will pay significantly more in shipping charges than a buyer in Lincoln, Nebraska, and Central Ice Machine will pay none. The shipping cost will depend on the distance and other factors such as the shipping method chosen. Choice B is incorrect because, as stated above, the buyer is responsible for shipping costs. Choice C is also incorrect because the cost to ship will be determined by distance and other factors, not the state or city name. Choice D is incorrect because the buyers, not Central Ice Machine, are responsible for paying shipping costs.

Central Ice Machine Company Is Located in Omaha, Nebraska, Sells