Why Are Line Extensions More Common Than New Products

question 176

Multiple Choice

Why are line extensions more common than new products?

• A) They are higher risk and more expensive.
• B) They are guaranteed to succeed in the marketplace.
• C) They are less expensive and lower-risk.
• D) They require no market research.
• E) Modifications to existing products are very easy.

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Definitions:

Variable Costs

Expenditures that vary in a direct manner with the volume of output or sales.

Straight-Line Depreciation

A mechanism for spreading the expenditure of a tangible asset over its longevity in equal annual fractions.

Interest Payments

The regular payments made by a borrower to a lender as compensation for the use of borrowed money, usually calculated as a percentage of the outstanding principal.

CCA Class

In the context of Canadian taxation, refers to the categorization of depreciable property for the purpose of calculating capital cost allowance (tax deductions for depreciation).