Amazing Company provides a warranty with all its products it sells. It estimates that it will sell 1,200,000 units of its product for the year ended December 31, 2021, and that its total revenue for the product will be P100,000,000. It also estimates that 60% of the product will have no defects, 30% will have major defects, and 10% will have minor defects. The cost of a minor defect is estimated to be P5 for each product sold, and the cost for a major defect cost is P15. The company also estimates that the minimum amount of warranty expense will be P2,500,000 and the maximum will be P12,000,000. How much is the Provision for Warranty to be reported at December 31, 2021?
Amazing Company provides a warranty with all its products it sells. It estimates that it will sell 1,200,000 units of its product for the year ended December 31, 2021, and that its total revenue for the product will be P100,000,000. It also estimates that 60% of the product will have no defects, 30% will have major defects, and 10% will have minor defects. The cost of a minor defect is estimated to be P5 for each product sold, and the cost for a major defect cost is P15. The company also estimates that the minimum amount of warranty expense will be P2,500,000 and the maximum will be P12,000,000. How much is the Provision for Warranty to be reported at December 31, 2021?
Chapter12: Current Liabilities
Section: Chapter Questions
Problem 9MC: Blake Department Store sells television sets with one-year warranties that cover repair and...
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Amazing Company provides a warranty with all its products it sells. It estimates that it will sell 1,200,000 units of its product for the year ended December 31, 2021, and that its total revenue for the product will be P100,000,000. It also estimates that 60% of the product will have no defects, 30% will have major defects, and 10% will have minor defects. The cost of a minor defect is estimated to be P5 for each product sold, and the cost for a major defect cost is P15. The company also estimates that the minimum amount of warranty expense will be P2,500,000 and the maximum will be P12,000,000.
How much is the Provision for Warranty to be reported at December 31, 2021?
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