To increase customer satisfaction and attract additional customers an electronics company is considering offering an extended...

 

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To increase customer satisfaction and attract additional customers an electronics company is considering offering an extended warranty with all products. The management accountant has provided the following figures: • extended warranty, major repair to all goods sold in a period would be £26,000 • extended warranty, minor repair to all goods sold in a period would cost £8,000. • the probability of goods needing a major repair is 6% • the probability of goods needing a minor repair is 12% i) Calculate the predicted cost of this initiative. You are required to show all workings, rounding to two decimal places if required. ii) Identify the warranty in i) above, as a provision, contingent liability, or a contingent asset. Discuss the main differences between a provision and a contingent liability. You are encouraged to provide relevant examples to support your explanation. Written work must be in your own words with in-text citation, a bibliography is not required. Word count: no more than 800 words (20 marks) To increase customer satisfaction and attract additional customers an electronics company is considering offering an extended warranty with all products. The management accountant has provided the following figures: • extended warranty, major repair to all goods sold in a period would be £26,000 • extended warranty, minor repair to all goods sold in a period would cost £8,000. • the probability of goods needing a major repair is 6% • the probability of goods needing a minor repair is 12% i) Calculate the predicted cost of this initiative. You are required to show all workings, rounding to two decimal places if required. ii) Identify the warranty in i) above, as a provision, contingent liability, or a contingent asset. Discuss the main differences between a provision and a contingent liability. You are encouraged to provide relevant examples to support your explanation. Written work must be in your own words with in-text citation, a bibliography is not required. Word count: no more than 800 words (20 marks)