A company has a selling price of $1,900 each for its printers. Each printer has
ID: 2478585 • Letter: A
Question
A company has a selling price of $1,900 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $152 each. During November, the company sold 32,000 printers, and 420 printers were serviced under the warranty at a total cost of $57,000. The balance in the Estimated Warranty Liability account at November 1 was $30,000. What is the company's warranty expense for the month of November? A.48,640 B. 63,840 C. 97,280 D. 27,000 E. 57,000
Explanation / Answer
Solution:
Printers Sold during November month = 32,000
Estimation of returned printer under the warranty = 2%
Estimated Printers retuned = 32,000 * 2% = 640 Printers
Warranty Average Cost = $152
Warranty Expenses = Estimated Printer to be returned back under warranty x Average Warranty Cost = 640 Printer * 152 = $97,280
Company’s warranty expenses for the month of November is C. $97,280
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