A more thorough explanation:

Definition: Base-point pricing is a method of pricing that includes the cost of shipping from a set location to the buyer's location. The price at the factory is added to the freight charges, which are calculated based on the chosen shipping base point. This base point can be the same for all customers or a specific location, such as a manufacturing plant nearest to the buyer. It is a uniform pricing policy that presumes the cost of transportation to all locations is the same.

Example 1: A company sells its products using base-point pricing. The factory price of the product is $100, and the chosen shipping base point is $10. If a customer orders the product from a location that is 500 miles away from the base point, the freight charges will be calculated as the cost of shipping from the base point to the customer's location, which is $2 per mile. Therefore, the total price of the product for the customer will be $100 + ($10 + (500 x $2)) = $1110.

Example 2: A furniture manufacturer uses base-point pricing to sell its products. The factory price of a sofa is $500, and the chosen shipping base point is the manufacturing plant nearest to the buyer. If a customer orders the sofa from a location that is 100 miles away from the plant, the freight charges will be calculated as the cost of shipping from the plant to the customer's location, which is $1 per mile. Therefore, the total price of the sofa for the customer will be $500 + ($100) = $600.

These examples illustrate how base-point pricing works. The cost of shipping is added to the factory price of the product to determine the total price for the customer. The chosen shipping base point affects the freight charges, which can vary depending on the distance between the base point and the customer's location.