With the end goal of attracting as much customers as possible in NCR region, ABC Appliance Company
Question:
With the end goal of attracting as much customers as possible in NCR region, ABC Appliance Company engaged in a customer satisfaction program and marketing strategy for two of their major line products :
1.) Electrical appliance
2.) Household and office furniture.
All branches in the region are participating in the company's promotions. In the customer satisfaction program, ABC provides one-year warranty for replacement of parts and labor of the electrical appliances sold. Based on past experience, the estimated warranty cost is 3% of sales. During 2019, total sales of electrical appliances was P 7,200,000. Replacement parts and labor for warranty work totaled P 184,000 during 2019. In the company's marketing strategy for the household and office furniture section, customers are given a coupon for every P 1,000 spent on these items. Customers may exchange 10 coupons plus P 500 for a " hot and cold " water dispenser. Each water dispenser cost ABC P 1,200 and can be sold separately at P 2,500. ABC estimates that 40% of the coupons given to the customers will be redeemed. During 2019, sales of household and office furniture totaled P 2,600,000. A total of 100 water dispensers used in the promo were purchased and there were 800 coupons redeemed in 2019. For financial reporting purposes, ABC Company applies the associating cause and effect in accounting for warranties and IFRS 15 for the product premiums. The balances in the accounts related to warranties and premiums on January 1,2019 were shown as follows: Inventory of "hot and cold" water dispensers 30 units Estimated premiums claims outstanding P 17,500 Estimated liability for warranty P 80,000 How much is the warranty expense for the year ended December 31, 2019?
Business Research Methods
ISBN: 978-0073521503
12th edition
Authors: Donald R. Cooper, Pamela S. Schindler