Question

Ace Appliances sells dishwashers with a 3-year warranty. In 2012, there are $90,000 of sales revenues for dishwashers. The company estimates warranty expense at 3% of revenues. What is the 2012 warranty expense?

- $2,700
- $800
- $0
- $3,000

Answer 1

The 2012 warranty expense for Ace Appliances is $2,700.

Step-by-step explanation:

The 2012 warranty expense for Ace Appliances can be calculated by multiplying the sales revenues for dishwashers by the estimated warranty expense rate of 3%. The formula to calculate the warranty expense is:

Warranty Expense = Sales Revenues x Warranty Expense Rate

Plugging in the values: Warranty Expense = $90,000 x 0.03 = $2,700

Therefore, the 2012 warranty expense for Ace Appliances is $2,700.