A manufacturing company sells its main product with a

three year #267

A manufacturing company sells its main product with a three-year warranty against defects. The
company expects that 1% of the units sold will prove to be defective in the first year after they
are sold, 2% will prove to be defective in the second year, and 3% will prove to be defective in
the third year. The average cost to repair or replace a defective unit under the warranty is
expected to be $60. The company’s sales and warranty costs incurred in its first three years
were as follows:Required:a. Calculate the amount that should have appeared in the estimated
warranty provision account at the end of 2014.b. Calculate the amount of warranty expense that
should have been recognized in 2015.c. Considering the costs incurred to the end of 2016, do
you think the company’s estimates regarding the warranty costs were too high, too low, or just
about right? Explain your reasoning.View Solution:
A manufacturing company sells its main product with a three year

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