Question
During 2021, Blevert Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs
During 2021, Blevert Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: Actual Warranty Expenditures 2021 2022 2023 Sales $700,000 1,200,000 2,100,000 $4,000,000 4,000 22,000 100,000 $126,000 What amount should Blevert report as warranty expense for 2021? A. $4,000 B. $73,000 C. $81,000 OD. $77,000
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