12 Warranty Costs Milford Company sells a motor that carries a 60-day unconditional warranty against product failure. Based on a reliable statistical analysis, Milford knows that between the sale and the end of the product warranty period, two percent of the units sold will require repair at an average cost of $125 per unit. The following data reflect Milford's recent experience: Units sold Known product failures from sales in: October November December October November December Dec. 31 Total 34,500 33,000 37,500 105,000 180 270 195 240 330 315 690 525 315 Calculate the estimated liability for product warranties at December 31. $ (Assume that warranty costs of known failures have already been reflected in the records.)
12 Warranty Costs Milford Company sells a motor that carries a 60-day unconditional warranty against product failure. Based on a reliable statistical analysis, Milford knows that between the sale and the end of the product warranty period, two percent of the units sold will require repair at an average cost of $125 per unit. The following data reflect Milford's recent experience: Units sold Known product failures from sales in: October November December October November December Dec. 31 Total 34,500 33,000 37,500 105,000 180 270 195 240 330 315 690 525 315 Calculate the estimated liability for product warranties at December 31. $ (Assume that warranty costs of known failures have already been reflected in the records.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter11: Strategic Cost Management
Section: Chapter Questions
Problem 22E
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