Ralph, a Regional Sales Manager, Was Asked to Analyze Whether

question 64

Multiple Choice

Ralph, a regional sales manager, was asked to analyze whether his company should launch a marketing effort to become RightFoods' produce supplier this year. He found that Fresh Green Veggies currently has a supply contract with RightFoods that has three more years in its term; RightFoods would have to pay Fresh Green $0.5 million to break the contract. Also, Fresh Green has installed automated ordering/billing software in RightFoods' home office; RightFoods would have to spend $100,000 to replace it and retrain its staff. He concluded that RightFoods' ________ costs would be too high to seriously consider a change in supplier, thereby recommending that a marketing effort not be launched this year.

• A) capital
• B) operating
• C) switching
• D) labor
• E) cooptation

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Definitions:

Taxed As

The classification or manner in which a financial transaction or entity is subjected to taxation by governing authorities.

Promoter

An individual or organization that helps to plan, finance, and organize the founding or operations of a company or event.

Contract Adoption

The act of agreeing to and accepting the terms of a contract, thereby making it legally binding.

Novation

The act of replacing an existing contract with a new one, whereby a new party takes over the rights and duties of the original agreement.