According to the Article "What's Behind Starbucks' Price Hike?" in October

question 85

Multiple Choice

According to the article "What's Behind Starbucks' Price Hike?" in October 2006,Starbucks raised the price of its lattes,cappuccinos,drip coffee,and other drinks because of increases in wages and fuel costs.When it chose to hike prices,Starbucks was

• A)Losing sales to its competitors and therefore needed higher prices to maintain revenue.
• B)Relying on the economy to improve in order to offset the loss in sales as a result of the price hikes.
• C)Relying on brand loyalty to prevent a significant loss in sales.

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Definitions:

Expected Cost

An estimate of the cost for a product, project, or operation that is anticipated under normal conditions.

Sell

The act of giving or handing over something in exchange for money.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behaviors are valid.