Appliance Resellers Ltd. (ARL) sells gently used and refurbished appliances. The company provides a three-month warranty...

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Appliance Resellers Ltd. (ARL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2020, the estimated cost related to the three-month warranties was $39,600, of which $25,700 had been incurred before year end. ($18,600 on replacement appliances and $7,100 for parts) For an additional charge of $120, ARL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2020, ARL sold 400 three- year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $15,200. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $45,600, which it expects will occur evenly over the warranty period. Appliance Resellers Ltd. (ARL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2020, the estimated cost related to the three-month warranties was $39,600, of which $25,700 had been incurred before year end. ($18,600 on replacement appliances and $7,100 for parts) For an additional charge of $120, ARL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2020, ARL sold 400 three- year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $15,200. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $45,600, which it expects will occur evenly over the warranty period.