Fawn Company manufactures one product for ($ 12) per unit and sells it for ($ 20) per
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Fawn Company manufactures one product for \(\$ 12\) per unit and sells it for \(\$ 20\) per unit. In October, the company sold 150,000 units subject to a one-year warranty. According to the warranty, customers must pay a \(\$ 2.25\) service charge to return a broken unit and have it replaced by a new unit. When a unit under warranty fails, the company simply discards the broken unit and replaces it with a new one. Past experience suggests a \(2 \%\) failure rate of new products sold, and customers actually returned 1,800 broken units during the month of October. Prepare summary entries for the month of October to record product warranty expense and to record the replacement of 1,800 broken units.
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