Question

A company has a selling price of $1,550 each for its printers. each printer has a 2 year warranty that covers replacement of defective parts. it is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $145 each. during november, the company sold 25,000 printers, and 350 printers were serviced under the warranty at a total cost of $50,000. the balance in the estimated warranty liability account at november 1 was $26,500. what is the company's warranty expense for the month of november?

Answer 1

$72,500

Step-by-step explanation:

The computation of warranty expense is shown below:-

Estimated Printers returned = Printers Sold × Estimation of the returned printer under the warranty

= 25,000 × 2%

= 500

Warranty Expenses = Estimated Printer to be returned × Average Warranty Cost

= 500 × $145

= $72,500

Therefore for computing the warranty expense we simply applied the above formula.