Rincon Ltd has been operating for a number of periods and has been selling jet-propelled surfboards. At the end of the reporting period, available data suggests: If small defects arise with all of the products that have been sold, the related repair costs would be $3. 5 million. If significant defects arise with all of the products sold, the related costs would be $12 million. Based upon past experience within Rincon Ltd, and within the industry, it is believed that 75 per cent of all products will have no defects, 15 per cent will have small defects and 10 per cent will have significant defects.

REQUIRED
What should the balance of the closing provision for warranty repairs be?