Question

1. Izzy Company sells a television that carries a 90-day unconditional warranty against product failure. From prior years’ experience, Izzy estimates that 4% of units sold each period will require repair at an average cost of $150 per unit. During the current period, Izzy sold 22,000 units and repaired 200 units.How much warranty expense must Izzy report in its current period income statement? 138,000 132,000 102,000 30,000 1

Answer 1

Answer:

$132,000

Explanation:

The computation of the warranty expense is shown below:

Warranty expense = Units sold × repaired cost × estimated percentage

= 22,000 units × $150 × 4%

= $132,000

We simply multiplied the unit sold with the repaired cost and the estimated percentage so that the amount of warranty expense could come

All other things that are mentioned in the question is not relevant. Hence, ignored it