Emerson Smith, Sales Director for a Beverage Wholesaler, Analyzed Whether

Multiple Choice

Emerson Smith, sales director for a beverage wholesaler, analyzed whether his company should attempt to become beverage supplier next year for TopChoice, a national fast food chain. Emerson learned that Deluxe Beverages, Inc., currently has a supply contract with TopChoice that has three more years in its term; TopChoice would have to pay Deluxe Beverages $3 million to terminate the supply contract early. Also, Deluxe Beverages has installed automated beverage ordering software in TopChoice's home office; TopChoice would have to spend $1 million to replace the software and retrain its staff. Emerson concluded that TopChoice's ________ costs would be too high to seriously consider a change in supplier during the multi-year term of the supply contract, so he decided not to attempt to become TopChoice's beverage supplier next year.

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