EZ Electronics is running a video game promotion. For every 10 video gamespurchased, the customer receives a coupon upon checkout to receive a free game. The coupons expire in one year. EZ estimates that about half of its video game customers will qualify to receive a coupon. In thepast, the store has recognized a gross profit margin of40% of the selling price on video games. What would the expected redemption percentage be to calculate the premium expense and related contingentliability? (Remember to use the gross profit margin to arrive atcost.)

A.

2% of total video game sales

B.

2.5% of total video game sales

C.

3% of total video game sales

D.

5% of total video game sales