Alexander, Inc., manufactures and sells computer monitors with a three-year warranty.

When calculated using the expected value approach, Alexander found that expected warranty costs are roughly equal to about 7% of sales during the warranty period. The following table shows the sales and actual warranty payments during the fi rst two years of operations:

Based on these facts, what amount of warranty liability should Alexander, Inc., report on its balance sheet at December 31, 20X1?

a. $33,150

c. $84,000

b. $30,000

d. $50,850