A company has a selling price of $1,500 each for its printers. Each printer has

Question

A company has a selling price of $1,500 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 3% of all printers sold will be returned under the warranty at an average cost of $144 each. During November, the company sold 24,000 printers, and 340 printers were serviced under the warranty at a total cost of $47,000. The balance in the Estimated Warranty Liability account at November 1 was $26,000. What is the company's warranty expense for the month of November? Multiple Choice $48,960 $47,000 $103,680 $21,000 K Prev 2 of 5 Next>

Explanation / Answer

Warranty expense is the cost that a business expects to or has already incurred for the repair or replacement of goods that it has sold. The total amount of warranty expense is limited by the warranty period that a business typically allows. After the warranty period for a product has expired, a business no longer incurs a warranty liability.

Therefore warranty expense for November amounts to :

= 24000 * 3% * 144

= $ 103,680

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