Libra Electronics Has Invented a New Technology to Make Laptops

question 48

Multiple Choice

Libra Electronics has invented a new technology to make laptops that are extremely lightweight and unbreakable. The company is advertising aggressively and wishes to create demand for its new range of laptops. To attract customers, the company has priced the laptops attractively. However, in order to make profits, the company has priced the batteries required for the laptops extremely high. Which of the following is illustrated in this scenario?

• A) downsizing strategy.
• B) harvest strategy.
• C) razor and blade strategy.
• D) divestment strategy.
• E) switching costs.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated portion of accounts receivable that may not be collectible.

Uncollectible Receivables

Amounts due from customers that are considered unlikely to be collected and are written off as a loss.

Bad Debt Expense

The expenses linked to the accounts receivable that a business cannot recover.

Debit Balance

A situation in an account where the sum of debits exceeds the sum of credits, indicating an amount owed or an asset.