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Use this given information to answer Questions 26-29. A manufacturing company sells motorcycles with a five-year warranty against manufacturer's defects. The manufacturer expects that 0%
Use this given information to answer Questions 26-29. A manufacturing company sells motorcycles with a five-year warranty against manufacturer's defects. The manufacturer expects that 0% of the motorcycles sold will prove to be defective in the first year after they are sold, 1% will prove to be defective in the second year, 2% will prove to be defective in the third and fourth years, and 3% will prove to be defective in the fifth year. The average cost to repair or replace a defective unit under the warranty is expected to be $40. The company's sales and warranty costs incurred in its first five years were as follows: Actual Costs of Repairs and Units Sold Replacements under the Warranty Plan 2016 7,000 $ 500 2017 9,000 $16,000 2018 10,000 $30,000 2019 12,000 $24,000 2020 6,000 $12,000 Determine the warranty expense matched to 2018 revenue and the warranty provision increase for 2018 a. warranty expense 2018: $30,000; warranty provision 2018: $12,800 b. warranty expense 2018: $28,800; warranty provision 2018: $2,000 C. warranty expense 2018: $30,000; warranty provision 2018: $2,000 Cd. warranty expense 2018: $32,000; warranty provision 2018: $36,700
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