An entity started business in 2022. It sells printers with a three-year warranty. The entity estimated its
Question:
An entity started business in 2022. It sells printers with a three-year warranty. The entity estimated its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the first year of warranty, 5% will be repaired during the special year of warranty and 10% will be in the third year. In 2022 and 2023, the entity was able to sell 7,500 and 10,000units, respectively at a selling price of P4,000 per unit.
The entity also incurred actual repair costs of P800,000 and P2,400,000 in 2022 and 2023, respectively. Sales and repairs occur evenly throughout the period. What is the unadjusted warranty expense for 2023?
Basic Business Statistics Concepts and Applications
ISBN: 978-0132168380
12th edition
Authors: Mark L. Berenson, David M. Levine, Timothy C. Krehbiel