Question

Excom sells radios and each unit carries a two-year replacement warranty. Typically, 5% of the radios sold need to be replaced costing Excom $23 per radio. During September, Excom sold 80 radios for $46 each. For what amount in September would Excom debit Product Warranty Expense? Round your answer to the nearest whole dollar.

Answer 1

The amount debited under Product Warranty Expense by Excom in September is $184

Step-by-step explanation:

Given Parameters

Warranty = 2 years

5% of the radios sold need to be replaced

Cost of Replacement = $23 per radio.

September Activities

Units of radio sold = 80

Cost Price = $46 each.

Required:

Amount of Product Warranty Expense

First, the total income in September needs to be calculated.

Total Income = Unit Price * Unit Sold

Total Income = $46 * 80

Total Income = $3,680

It's stated that 5% of the total Income is used as the cost of repairing defects under the warranty period.

The Amount of Product Warranty Expense is calculated by multiplying total income in September by cost of repairing defects.

Mathematically,

Amount of Product Warranty Expense = Total income in September * Cost of repairing defects.

Amount of Product Warranty Expense = $3,680 * 5%

Amount of Product Warranty Expense = $3,680 * 0.05

Amount of Product Warranty Expense = $184

Hence, The amount debited under Product Warranty Expense by Excom in September is $184

Answer 2

$92

Step-by-step explanation:

If 5% of Excom's sold radios must be replaced at $23 each, to calculate the warranty expenses all we need to do is multiply 5% times 80 radios (number of radios sold during September) times $23.

Excom's warranty expenses for September = 5% x 80 x $23 = $92