Warranties Sound Company manufactures and sells high-quality stereos. The most popular line sells for

$2,000 each and is accompanied by a three-year warranty to repair, free of charge, any defective unit. Average costs to repair each defective unit will be $180 for replacement parts and $120 for labor. Sound estimates that warranty costs of $25,200 will be incurred during 2008. The company actually sold 600 sets and incurred replacement part costs of $7,200 and labor costs of $10,800 during the year. The adjusted 2008 ending balance in the Estimated Liability for Warranties account is $20,400.

Required 1. How many defective units from this year’s sales does Sound Company estimate will be returned for repair?

2. What percentage of sales does Sound Company estimate will be returned for repair?