Trighton's Trailer Co. Warranty Expense Calculation
Calculating Warranty Expenses for Trighton's Trailer Co.
Trighton's Trailer Co. sells all kinds of trailers and provides a one-year warranty on all new trailer sales. Based on history, Trighton anticipates that 2% of trailers will be returned and will have a warranty cost of $100 per trailer. During the month, Victor sold 300 trailers for a total of $255,000.
At the end of the month, Trighton will record $600 in warranty expenses.
Expenses is a term used in economics that can be described as the amount that is incurred in making a commodity or a product. These are the basic inputs that the firm has to acquire to maintain a particular product or products.
Trighton anticipates a return of 2% and will have a warranty cost of $100 per trailer. As Victor sold 300 trailers for a total of $255,000, the total cost that would be incurred will be with respect to the anticipated return of 2% on the warranty cost and the number of the visitors or the seller have sold to the customer. Therefore the amount Trighton will record in warranty expenses is calculated as follows;
= 300 x 0.02 x $100
= $600
What is the total amount Trighton's Trailer Co. will record in warranty expenses at the end of the month? Trighton's Trailer Co. will record $600 in warranty expenses at the end of the month.