How to calculate warranty expense?
Understand the Problem
The question is asking how to determine the warranty expense, which is typically based on estimating future warranty claims based on past experiences and sales data.
Answer
Multiply the number of defective products by the cost per repair or replacement.
The final answer is to calculate the warranty expense by multiplying the number of defective products by the cost per repair or replacement.
Answer for screen readers
The final answer is to calculate the warranty expense by multiplying the number of defective products by the cost per repair or replacement.
More Information
Warranty expense is generally used by businesses to estimate the cost associated with repairing or replacing defective products covered under warranty. This forecasting helps in setting aside the correct liability.
Tips
Common mistakes include using incorrect historical data to determine defect rates and not considering all potential costs (e.g., labor, parts). Make sure to use accurate and relevant data.
Sources
- Warranty Expense - Overview, Recognition, How To Calculate - corporatefinanceinstitute.com
- What Is Warranty Accounting? | Indeed.com - indeed.com
