Question

Blast sells portable CD players, and each unit carries a one-year replacement warranty. The cost of repair defects under the warranty is estimated at 10% of the sales price. During May, Blast sells 650 portable CD players for $50 each. For what amount in May would Blast debit Product Warranty Expense? a.$650 b.$3,250 c.$1,625 d.$1,300

Answer 1

Answer:

Option B is correct ( $3,250)

Product Warranty Expense= $3,250

Explanation:

Option B is correct ( $3,250)

In order to find Blast debit Product Warranty Expense we will proceed as follow:

Formula we are going to use is:

Product Warranty Expense= Cost of repair defects under the warranty *Total sales

Total Sales= Price of 1 portable CD players * Total portable CD players Sold

Total Sales=$50 * 650

Total Sales=$32,500

Product Warranty Expense= 10% * $32,500

Product Warranty Expense= $3,250