Cherokee Cable Corporation, sells heavy wire cable to large construction companies around the country. Customers pay shipping from a central warehouse in Dallas. Recently, a new competitor in Atlanta has been taking away some of Cherokee Cable's southern customers. If Cherokee Cable wants to compete in those distant markets, but not increase the cost of its product to other customers, it would probably switch to

Question

Quizplus · Accepted Answer

Freight absorption pricing would allow Cherokee Cable Corporation to absorb the extra shipping costs to the southern markets, allowing them to maintain competitive pricing without increasing the cost of their product to other customers. This could help them to regain market share in those markets and compete with the new competitor in Atlanta.

Cherokee Cable Corporation, Sells Heavy Wire Cable to Large Construction