In addition to the one-year warranty included with the transac-tion price, customers were given the option to purchase a special two-year warranty that covers product failures not covered in the standard warranty. When purchased, the special warranty becomes effective on the first day of the subsequent quarter (e.g., warranties purchased in February become effective on April 1 st and the special warranty continues for the next 8 quarters).

The warranty was sold at the time the machine was sold at a price of $5,000

During 2020 purchasers of 60 Apex-10 machines also purchased the optional warranty (included in revenue for the year). The 60 machines were purchased evenly over the year (5 per month).

Expectations are that costs for coverage relating to the special warranty will be $3,000 per machine with most of the costs incurred in the second of the two years. In 2020, the company incurred warranty costs of $36,000 relating to the special warranty. It also incurred costs of $100 per month, per machine, for its regular warranty.

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