Novak Ltd sells medical devices to the Australian market. The company provides 12 months product warranty to replace and/or repair any faulty products for its customers. Based on the companys experience, 2% of the products sold require replacement, while 4% of the products sold require a repair within the warranty period. Product replacement costs $300 each, and the repair costs are $100 each. During the year ended 30 June 2022 Novak Ltd sold 7,000 medical devices.