Pricing, customer profitability, managing customer relationships Read the Wall Street Journal article “Survival Strategies: After Cost Cutting, Companies Turn toward Price Increases” by Timothy Aeppel (September 18, 2002, p. A1). The article reports “an all-out search for new ways to charge more money without raising prices.” Required (a) How did Jergens, Inc., use an activity-based costing approach to justify the price for an order of odd-size metal locating fasteners? (b) What issues arose in Goodyear Tire & Rubber’s pricing to distributors? What was Goodyear’s response? (c) What was the outcome of Emerson Electric’s decision to depart from cost-based pricing? How can a product costing system contribute to undercosting a low-volume or customized product? (d) How did Wildeck influence customers to purchase products and services that are more profitable to Wildeck? How did Wildeck respond to a competitor’s lower priced storage-rack protector? What role should a cost system play in such decisions? (e) Why was Union Pacific not concerned if it lost its less profitable customers? Will dropping unprofitable customers always lead to an immediate increase in profit?
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