Question
Company A provides a one-year warranty to its clients for HDD cameras. An analysis of the Claims department, based on past experience, shows that 85%
Company "A" provides a one-year warranty to its clients for HDD cameras. An analysis of the "Claims" department, based on past experience, shows that 85% of the products are not subject to warranty claims. In addition, approximately 10% of the cameras sold have minor defects and another 5% require major repairs or replacement. The average sales price of an HHD camera is USD 700. For 2020, the Company has generated the following sales and the "Controlling" department has provided the following estimate for the removal of defects in the warranty claims:
Number | USD | |
Sales (number) | 15,000 | |
The average cost of repair per number, of which | ||
Major repair | 600 | |
Minor defects | 80 |
What is the size of the provision for warranties as of 31 December 2020?
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