Question
Brigham Company sells an electric timer that carries a 60-day unconditional warranty against product failure. Based on a reliable statistical analysis, Brigham knows that between
Brigham Company sells an electric timer that carries a 60-day unconditional warranty against product failure. Based on a reliable statistical analysis, Brigham knows that between the sale and the end of the product warranty period, three percent of the units sold will require repair at an average cost of $123 per unit. The following data reflect Brighams recent experience:
October November December Dec. 31 Total
Units sold $36,000 $34,000 $45,000 $115,000
Known product failures from sales in:
October $320 $550 $210 $1,080
November $230 $360 $590
December $410 $410
Calculate the estimated liability for product warranties at December 31: $
(Assume that warranty costs of known failures have already been reflected in the records.)
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