During May, Blast sold 650 portable CD players for $50 each. Each CD player cost Blast $25 to purchase and carried a one-year warranty. If 10 percent of the goods sold typically need to be replaced over the warranty period, what amount should Blast debit Product Warranty Expense for in May?
A) $3,250
B) $1,625
C) $ 650
D) $1,300

Question

Quizplus · Accepted Answer

To calculate the amount that Blast should debit Product Warranty Expense for in May, we need to first calculate the number of CD players that will likely need to be replaced over the warranty period.

10% of the 650 CD players sold in May is 65.

This means that we can expect Blast to replace 65 CD players over the next year.

To calculate the cost of these replacements, we need to multiply the cost per CD player ($25) by the number of CD players that will need to be replaced (65):

$25 x 65 = $1,625

Therefore, the amount that Blast should debit Product Warranty Expense for in May is $1,625.

During May, Blast Sold 650 Portable CD Players for $50