Too Nice Company (TNC) includes with the sale of its jumping bean machine, a 5-year warranty that
Question:
Too Nice Company (TNC) includes with the sale of its jumping bean machine, a 5-year warranty that covers all repairs and maintenance. The selling price for the jumping bean machine and the related warranty is $1,000. A competitor sells a similar machine without any warranty for $850. TNC does not sell the warranty separately nor is it aware of any company that does. TNC estimates it will cost $120 to perform warranty work on each jumping bean machine over the 5-year warranty period. TNC’s average markup on sales is 40%. In 2019, TNC sells 1,200 jumping bean machines, and incurs $22,000 total warranty cost on the 1,200 machines.
How much revenue will be recognized from the above transaction in 2019?
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson