FA Chapter $9$ Homework

Question $4$

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Warranty Costs

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 $$88$ per unit.

The following data reflect Brigham's recent experience:

$\backslash$table$[[,$October,November,December,Dec. $31$ Total$],[$Units sold,$54,000,51,000,67,500,172,500],[$Known product failures from sales in:$,,,,],[$October$,480,825,315,1,620],[$November$,,345,540,885],[$December$,,,615,615]]$

Calculate the estimated liability for product warranties at December $31.$$

$($Assume that warranty costs of known failures have already been reflected in the records.$)$