In 2023, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 4% of sales revenue. First-year sales of the heaters were $320,000. An evaluation of the company’s claims experience in late 2024 indicated that actual claims were less than expected—3% of sales rather than 4%. Assuming sales of the heaters in 2024 were $370,000 and warranty expenditures in 2024 totaled $9,100, what is the 2024 warranty expense?
In 2023, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 4% of sales revenue. First-year sales of the heaters were $320,000. An evaluation of the company’s claims experience in late 2024 indicated that actual claims were less than expected—3% of sales rather than 4%. Assuming sales of the heaters in 2024 were $370,000 and warranty expenditures in 2024 totaled $9,100, what is the 2024 warranty expense?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In 2023, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 4% of sales revenue. First-year sales of the heaters were $320,000. An evaluation of the company’s claims experience in late 2024 indicated that actual claims were less than expected—3% of sales rather than 4%.
Assuming sales of the heaters in 2024 were $370,000 and warranty expenditures in 2024 totaled $9,100, what is the 2024 warranty expense?
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