Question

Excom sells radios and each unit carries a two-year replacement warranty. The cost of repair defects under the warranty is estimated at 5% of the sales price. During September, Excom sells 132 radios for $54 each. One radio is actually replaced during September. For what amount in September would Excom debit Product Warranty Expense?
A. $4,088
B. $28
C. $49
D. $358

Answer 1

Answer:

D. $358

Explanation:

The computation of the Product Warranty Expense is shown below:

= Number of radios sold × selling price per radios × estimated warranty percentage

= 132 radios × $54 × 5%

= $356.40

i.e $358 approx

By multiplying the number of radios sold with the selling price and the estimated warranty percentage we can get the product warranty expense  58