At the beginning of 2018, SUN Corporation began offering a 2-year warranty on its products. The warranty program was expected to cost STAR 5% of net sales. Net sales made under warranty in 2018 were $180 million. Fifteen 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 STAR's 2018 income statement is:
Select one:
a. $ 5.3 million.
b. $ 27.0 million.
c. $ 7.2 million.
d. $ 9.0 million.
Solution :
Warranty expenses = 5% of Net sales
Warranty expenses = 5% of $ 180 million
Warranty expenses = $ 9 million
Final answer : Option D - $ 9 million
At the beginning of 2018, SUN Corporation began offering a 2-year warranty on its products. The...
At the beginning of 2018, SUN Corporation began offering a 2-year warranty on its products. The warranty program was expected to cost STAR 5% of net sales. Net sales made under warranty in 2018 were $180 million. Fifteen 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 STAR's 2018 income statement is: Select one: a. $ 5.3 million. b. $ 27.0 million. c. $...
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