All of These Are True About Product Line Extensions Except

question 71

Multiple Choice

All of these are true about product line extensions except which?

• A) This strategy can result in lower advertising and promotion costs.
• B) A risk that comes with product line extensions is that sales of an extension may come at the expense of other items in the company's product line.
• C) A product line extension raises the level of brand awareness.
• D) Line extensions work best when they provide incremental company revenue by taking sales away from competing brands.
• E) Product line extensions involve using a current brand name to enter a different product class.

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Definitions:

R&D Expenditures

Research and Development expenditures are costs incurred in the process of discovering, developing, and enhancing products, technologies or services.

Engine-Oil Additive

A substance added to engine oil to improve its properties, such as reducing friction, wear, or corrosion, and enhancing performance.

Sunk Cost

A cost that has already been incurred and cannot be removed and therefore should not be considered in an investment decision.

Straight-Line Depreciation

A method of allocating an asset's cost evenly over its useful life, resulting in a consistent depreciation expense each year.