Question

question content area excom sells radios and each unit carries a two-year replacement warranty. the cost of repair defects under the warranty is estimated at 5% of the sales price. during september, excom sells 172 radios for $46 each. one radio is actually replaced during september. for what amount in september would excom debit product warranty expense? a.$28 b.$396 c.$4,816 d.$46

Answer 1

The amount of warranty expense that should be get debit from Exom is $396.

Calculation:

No. of radios sold = 172

Sale price of each unit = $46

Total sales price = 172*46 = $7,912

Warranty expense = 5% of sales price

Total warranty expense= $7,912*5/100 = $396

A warranty is a commitment that a producer or other similar party makes about the state of their goods. It also relates to the conditions and circumstances under which fixes or replacements will be made in the event that item does not perform as originally intended or stated. Usually, warranties feature exclusions that restrict the circumstances under which a producer is required to fix a defect. A warranty outlines the circumstances whereby the seller is responsible and those that are not. Although the warranty is not a distinct expense again for consumer, it is paid for as part of the transaction price.

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