At the beginning of 2018, ABC began offering a 1-year warranty on its products. The warranty program was expected to cost ABC 4%

Question

2 years ago

14

At the beginning of 2018, ABC began offering a 1-year warranty on its products. The warranty program was expected to cost ABC 4%

of net sales. Net sales made under warranty in 2018 were $180 milion. Five percent of the units sold were returned in 2018 and repaired or replaced at a cost of $5.3 million. The amount of warranty expense on ABC's 2018 income statement is
A) $27.0 million.
D) S5.3 million.
B) S9.0 million.
C) S7.2 million.

Business

1 answer:

s344n2d4d5 [400] · Answer 1 · 2023-06-20T11:18:28+03:00

Answer:

$7.2 million

Explanation:

Calculation for the amount of warranty expense on Angel's 2016 income statement

Using this formula

Warranty expense =Net sales ×Expected percentage of net sales

Let plug in the formula

Warranty expense=$180 million×4%

Warranty expense=$7.2 million

Therefore the amount of warranty expense on Angel's 2016 income statement will be $7.2 million