K2 Inc. manufactures equipment for individual and team sports including skiing, snowboarding, and in-line skating. The company offers a one-year warranty on all products. During 2014, the company recorded net sales of $1,934.7 million. Historically, about 2% of all sales are returned under warranty and the cost of repairing and/or replacing goods under warranty is about 50% of the retail value. Assume that at the start of the year K2s balance sheet included an accrued warranty liability of $8.43 million and at the end of the year the accrued warranty liability balance was $6.49 million.

1. Calculate K2s warranty expense for 2014.

a. $1.94 million

b. $10.92 million

c. $19.35 million

d. $25.84 million

e. None of the above