Fresh Products Ltd. is gathering evidence to support an acerual for warranty claims. The warranty is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Fresh Products Ltd. is gathering evidence to support an acerual for warranty claims. The warranty is offered on three products sold to ensure that they operate as expected. For Product 1, there are 75 warranty claims outstanding. One-third have a potential value of $1.000 each (90% of these will be paid, based on past history), one-third have a potential value of $5.000 each (70% of these will be paid), and one-third have a potential payout of $12,000 each (60% will be paid). The claims that are not paid are likely to be dismissed because of an expired warranty or incorrect statement of damages. For Product 2, there are only nine claims outstanding: however, all are large, at $50,000 each. The experienced claims adjustor reviewing the files is completely confident that eight will be dismissed without any payment. For the remaining claim, there is a 60% chance that it will have to be paid in full and a 40% chance that it will be dismissed. Product 3 has only one potential claim outstanding. The claim is for $1,000,000. and the adjustor believes that there is a 60% chance it will be dismissed, a 10% chance it will result in a payout of $1,000,000, and a 30% chance that there will be a payout of $200,000, Required: Indicate the amount that should be recorded as a warranty provision for each product. Page 884 Fresh Products Ltd. is gathering evidence to support an acerual for warranty claims. The warranty is offered on three products sold to ensure that they operate as expected. For Product 1, there are 75 warranty claims outstanding. One-third have a potential value of $1.000 each (90% of these will be paid, based on past history), one-third have a potential value of $5.000 each (70% of these will be paid), and one-third have a potential payout of $12,000 each (60% will be paid). The claims that are not paid are likely to be dismissed because of an expired warranty or incorrect statement of damages. For Product 2, there are only nine claims outstanding: however, all are large, at $50,000 each. The experienced claims adjustor reviewing the files is completely confident that eight will be dismissed without any payment. For the remaining claim, there is a 60% chance that it will have to be paid in full and a 40% chance that it will be dismissed. Product 3 has only one potential claim outstanding. The claim is for $1,000,000. and the adjustor believes that there is a 60% chance it will be dismissed, a 10% chance it will result in a payout of $1,000,000, and a 30% chance that there will be a payout of $200,000, Required: Indicate the amount that should be recorded as a warranty provision for each product. Page 884
Expert Answer:
Answer rating: 100% (QA)
Answer Particulars Product 1 Product 2 Product 3 Total Remarks Provis... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
On December 31, 2020, Tango Corp. sold product to Omat Limited, accepting a 3%, four-year promissory note of $400,000 in exchange. Interest is payable annually on December 31, starting December 31,...
-
. A positively charged particle is released from rest at the center of a parallel plate capacitor. The capacitor has area A, plate separate d, and is charged to Q. The released charge has charge q...
-
Use the Chain Rule to evaluate the partial derivative at the point specified. /u and /v at (u, v) = (1,1), where f(x, y, z) = x + yz, x = u + v, y = u + v, z , Z = uv
-
Under what circumstances do you use a p chart? Discuss.
-
A solution with oxygen dissolved in water containing $0.5 \mathrm{mg} \mathrm{\textrm {O } _ { 2 }} / 100 \mathrm{~g}$ of $\mathrm{H}_{2} \mathrm{O}$ is brought in contact with a large volume of...
-
Using the variance data for Menounos Manufacturing Co., prepare an income statement through gross profit for the year ended December 31, 20Y6. Assume the company sold 3,000 units at $100 per unit.
-
Consider the following LP problem: Maximize profit = 5X + 6Y Subject to 2X + Y 120 2X + 3Y 240 X, Y 0 (a) What is the optimal solution to this problem? Solve it graphically. (b) If a technical...
-
Outback Outfitters sells high quality hiking boots. They have a capacity to make1500 pairs per year. Each pair of hiking boots sells for $630. Annual fixed costs are $280,000,and the variable costs...
-
On December 1, Year 1, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and...
-
Suppose we have three stocks: A, B and C. Their expected returns are given by 0.21 r = 0.11 0.21 The covariance matrix is 1 0 0 V = 0 0.5 0 0 0 1 1) Find the Global Minimum Variance (GMV) Portfolio....
-
A project has an initial investment of $5 million, and is expected to yield cash inflows of $800,000 per year for the next nine years. The discount rate of the project is 11%. What is the payback...
-
prepare the appropriate cross-reference(s) for the following name(s) DBB Inc. (DeHart, Brady & Baldwin, Inc.).
-
Ducat Company has 2,000 outstanding shares and a Price/Earnings (P/E) ratio of $10.46. During the year Ducat had sales for $239400 that include a 30% mark up. Assume a 365 day year. Required 1: If...
-
Calculate current year depreciation or amortization for the following assets. Assume each is the only asset placed in service and the taxpayer wishes to maximize depreciation expense. Ignore any...
-
As evident, these terms are employed to determine the investment's yield according to the preferences of the investors. Both the future value and the present value can be utilized to compute the...
-
Briefly write the key points that you have discussed with the authority in meeting. You are a project manager in Wilson & Jones. You have assigned a new project for the implementation of a new Client...
-
For Problem estimate the change in y for the given change in x. y = f(x), f'(12) = 30, x increases from 12 to 12.2
-
1. In small groups, brainstorm a new product concept that spins off of the eGO Bike. 2. To perform a quick and dirty concept test, have the groups in #1 above run informal focus groups with other...
-
For frequently purchased products, successful new products must have high trial and repeat rates. What tools can the marketing manager use to increase trial rates? Repeat rates?
-
Integrated marketing communication (IMC) is a very important concept in marketing. What are the barriers to a marketing managers implementation of IMC? If IMC is not achieved, what is the impact on...
-
On January 1, 2015, Meredith Corporation purchased 25% of the ordinary shares of Pirates Company for 200,000. During the year, Pirates earned net income of 80,000 and paid dividends of 20,000....
-
Cairo Corporation has government bonds classified as held-for-collection at December 31, 2015. These bonds have a par value of \($800\),000, an amortized cost of \($800\),000, and a fair value of...
-
Komissarov Company has a debt investment in the bonds issued by Keune Inc. The bonds were purchased at par for 400,000 and, at the end of 2015, have a remaining life of 3 years with annual interest...
Study smarter with the SolutionInn App