In 2020, 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 6% of sales revenue. First-year sales of the heaters were
$340,000. An evaluation of the company's claims experience in late 2021 indicated that actual claims were less than expected—5% of
sales rather than 6%.
Assuming sales of the heaters in 2021 were $390,000 and warranty expenditures in 2021 totaled $17,500, what is the 2021 warranty
expense?