Blast sells portable CD players, and each unit carries a one-year replacement warranty. The cost of repair defects under the warranty is estimated at 10% of the sales price. During May, Blast sells 650 portable CD players for $50 each. For what amount in May would Blast debit Product Warranty Expense?
A) $3,250
B) $1,625
C) $650
D) $1,300

Question

Quizplus · Accepted Answer

The warranty expense is calculated as 10% of the total sales revenue. Total sales revenue for May is 650 units x $50 = $32,500. Therefore, the warranty expense is 10% of $32,500, which is $3,250.

Blast Sells Portable CD Players, and Each Unit Carries a One-Year