Question: In 2010 Quapau Products introduced a new line of hot
In 2010, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer's defects. Based on industry experience, warranty costs were expected to approximate 5% of sales revenue. First-year sales of the heaters were $300,000. An evaluation of the company's claims experience in late 2011 indicated that actual claims were less than expected—4% of sales rather than 5%. Assuming sales of the heaters in 2011 were $350,000 and warranty expenditures in 2011 totaled $12,000, what is the 2011 warranty expense?
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