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Milford Company sells a motor that carries a 60-day unconditional warranty against product failure. Based on a reliable statistical analysis, Milford knows that between the

Milford Company sells a motor that carries a 60-day unconditional warranty against product failure. Based on a reliable statistical analysis, Milford knows that between the sale and the end of the product warranty period, two percent of the units sold will require repair at an average cost of $175 per unit. The following data reflect Milfords recent experience: October November December Dec. 31 Total Units sold 23,000 22,000 25,000 70,000 Known product failures from sales in: October 120 180 160 460 November 130 220 350 December 210 210 Calculate the estimated liability for product warranties at December 31. $Answer (Assume that warranty costs of known failures have already been reflected in the records.)

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