The OA Company sells electrical goods covered by a one-year for any defects. Of sales of P70 million for the year, the company estimates that 3% will have major defects, 5% will have minor defects and 92% will have no defects. The cost of repairs would be CU5 million if all the products sold had major defects and CU3 million if all had minor defects. What amount should OA
recognize as a warranty provision?

Answer rating: 100% (QA)

To determine the amount OA should recognize as a warranty provision we need to calculate the expecte... View the full answer