Question

At the beginning of 2021, Angel Corporation began offering a two-year warranty on its products. The warranty program was expected to cost Angel 8% of net sales. Net sales made under warranty in 2021 were $212 million. Fifteen percent of the units sold were returned in 2021 and repaired or replaced at a cost of $5.20 million. The amount of warranty expense on Angel's 2021 income statement is:

Answer 1

$16.96 million

Step-by-step explanation:

The computation of the amount of warranty expense is shown below:

= Net sales made under warranty in year 2021 × expected cost percentage to net sales

= $212 million × 0.08

= $16.96 million

We simply multiplied the net sales with the expected cost percentage so that the amount of warranty expense could come and the same is to be considered