Question

A company has a selling price of $1,800 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $150 each. During November, the company sold 30,000 printers, and 400 printers were serviced under the warranty. What is the company's warranty expense for the month of November

Answer 1

Answer:

$90,000

Explanation:

Data given in the question

Selling price = $1,800

Estimated percentage = 2%

Average cost = $150

Number of printers sold = 30,000

Under the warranty, the printer under service = 400

So by considering the above information, the warranty expense is

= Number of printers sold × estimated percentage × average cost per printer

= 30,000 × 2% × $150

= $90,000

Answer 2

The company's warranty expense for the month of November assuming 400 printers were serviced under the warranty is $90,000.

Warranty expense

Warranty expense=Sales x Percentage of returned x Average cost of returned

Where:

Sales=30,000

Percentage of returned=2%

Average cost of returned=$150

Let plug in the formula

Warranty expense= 30,000 × 2% × $150

Warranty expense= $90,000

Inconclusion the company's warranty expense for the month of November assuming 400 printers were serviced under the warranty is $90,000.

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