Pirates PLC sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Pirates PLC has calculated that if all the goods sold in the last six months of the year required repairs the cost would be $2 million. If all of these goods had more serious faults and had to be replaced the cost would be $6 millionThe normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced. What is the amount of the provision required? Select one alternative: $1.6 million $6 million $2 million $0.6 million
Pirates PLC sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Pirates PLC has calculated that if all the goods sold in the last six months of the year required repairs the cost would be $2 million. If all of these goods had more serious faults and had to be replaced the cost would be $6 millionThe normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced. What is the amount of the provision required? Select one alternative: $1.6 million $6 million $2 million $0.6 million
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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.Pirates PLC sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Pirates PLC has calculated that if all the goods sold in the last six months of the year required repairs the cost would be $2 million. If all of these goods had more serious faults and had to be replaced the cost would be $6 millionThe normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced.
What is the amount of the provision required?
Select one alternative:
- $1.6 million
- $6 million
- $2 million
- $0.6 million
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