Question

Washing Machines, Inc. sells washing machines with a 2 year warranty. Washing Machines estimates that total warranty costs are 3% of sales. In the year 2016, Washing Machines recorded total sales of washing machines of $2,800,000. The balance in the Estimated Liability for Warranties account was $152,800 on December 31, 2015, and $102,400 on December 31, 2016. What must have been the actual cost of repairs (covered under warranty) for the year 2016?

          Washing Machines, Inc. sells washing machines with a 2 year
warranty. Washing Machines estimates that total warranty costs are
3% of sales. In the year 2016, Washing Machines recorded total
sales of washing machines of $2,800,000. The balance in the
Estimated Liability for Warranties account was $152,800 on December
31, 2015, and $102,400 on December 31, 2016. 
What must have been the actual cost of repairs (covered under
warranty) for the year 2016?

washing machines inc sells washing machines with a 2 year warranty washing machines estimates that total warranty costs are 3 of sales in the year 2016 washing machines recorded total sales 03972

Added by Chelsea T.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Joram Herman

Step 1

The estimated warranty costs are 3% of sales, so we can calculate it as follows: Estimated warranty costs = 3% * Total sales Estimated warranty costs = 3% * $2,800,000 Estimated warranty costs = $84,000 Show more…

Show all steps

Thanks for your feedback!

Washing Machines, Inc. sells washing machines with a 2 year warranty. Washing Machines estimates that total warranty costs are 3% of sales. In the year 2016, Washing Machines recorded total sales of washing machines of $2,800,000. The balance in the Estimated Liability for Warranties account was $152,800 on December 31, 2015, and $102,400 on December 31, 2016. What must have been the actual cost of repairs (covered under warranty) for the year 2016?