7. The Simpson Company sells toasters for $50 each. During Year One, Simpson sold 20,000toasters. Each toaster has a warranty requiring the company to fix any problems within thatoccur within 12 months. Company officials believe that 8 percent of the toasters will break inthat period and cost $20 each to fix. In Year One, 300 toasters break and are fixed at theanticipated cost. During Year Two another 1,200 of these toasters break; however, they nowcost $25 each to fix. What expense should the company report in Year Two in connection withthis warranty?