Question

Aviation Systems sells its products with a three-year manufacturing warranty. The company’s sales revenue is $600,000. Based on prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much warranty expense should the company record this year?

Answer 1

$30,000

Step-by-step explanation:

The computation of the warranty expense record this year is shown below:

= Sales revenue × estimated percentage

= $600,000 × 5%

= $30,000

We simply multiplied the sales revenue with the estimated percentage given in the question so that the accurate amount can come.

All other information which is given is not relevant. Hence, ignored it