Question

A company has a selling price of $2,300 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 3% of all printers sold will be returned under the warranty at an average cost of $160 each. During November, the company sold 40,000 printers, and 500 printers were serviced under the warranty at a total cost of $65,000. The balance in the Estimated Warranty Liability account at November 1 was $34,000. What is the company's warranty expense for the month of November

Answer 1

Answer:

The correct answer is $192,000.

Explanation:

According to the scenario, computation of the given data are as follows:

Returned average cost = $160

Printers sold = 40,000

Return percentage = 3%

So, we can calculate the company's warranty expense by using following formula:

Warranty expense = Returned average cost × Printers sold  × Return percentage

= $160 × 40,000 × 3%

= 6,400,000 × 3%

= $192,000