LM ltd sells a line of products with a six month warranty. Any defects that arise during
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LM ltd sells a line of products with a six month warranty. Any defects that arise during that period will be repaired free of charge. Hopewell has calculated that if all goods sold in the last six months of the year required repairs, the cost would be GHS2m. If all of these assets were to have more serious faults and had to be replaced, the cost would be GHS6m. The normal pattern is that 80% of goods sold will be fault free, 15% will require repairs, and 5% will need to be replaced. What is the amount of the provision required?
Related Book For
Financial Management Principles and Applications
ISBN: 978-0134417219
13th edition
Authors: Sheridan Titman, Arthur J. Keown, John H. Martin
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