Lovely Company offers a 2-year warranty on its product and as of 1/1/2018 Lovelys warranty liability had an overall balance of $625. During 2018 Lovely sold 1,600 units of inventory at a selling price of $125 per unit and repaired 35 units under warranty at a total repair cost to Lovely of $560. When accounting for warranty cost, Lovely studies prior year customer claims as well as projected labor and material costs and for 2018, Lovely estimated that 2% of the units sold in 2018 would break over the 2-year warranty period at an estimated repair cost of $17 per unit. What amount should Lovely report as warranty expense for the 12-months ended 12/31/2018?

		$560
		$544
		None of the answer choices shown are correct.
		$641
		$609