Question

Techno smart was organized to sell a single product for $2,400 per unit, including a 60-day warranty against defects. Engineering estimates indicate that 5% of the units sold will prove defective and require an average repair cost of $200 per unit. During the first month of operations, total sales were $768,000. Nine units sold in the first month were found defective and repaired that month. The accrued liability for product warranties at month-end should be:

Answer 1

To calculate the accrued liability for product warranties at month-end, multiply the number of defective units sold by the average repair cost per unit.

Step-by-step explanation:

To calculate the accrued liability for product warranties at month-end, we need to consider the total sales, the number of defective units sold, and the average repair cost. In the first month, the total sales were $768,000. The number of defective units sold was 9. The average repair cost per unit is $200.

To calculate the accrued liability for product warranties, multiply the number of defective units sold by the average repair cost per unit. In this case, 9 defective units were sold, so the accrued liability for product warranties is 9 x $200 = $1,800.