Shear Company sells computer equipment with a 2-year warranty.Prior experience indicates that costs associated with this warranty average 1% in the first year and 2% in the second year.In 2018,Shear had sales of $1,800,000.It paid $250,000 for materials and labour to make warranty-related repairs in 2018.What amount should the warranty expense for 2018 be?
A)$18,000
B)$36,000
C)$54,000
D)$250,000

Question

Quizplus · Accepted Answer

C)$1,800,000 × 3% = $54,000

Shear Company Sells Computer Equipment with a 2-Year Warranty