At the beginning of 2016,Angel Corporation began offering a two-year warranty on its products.The warranty program was expected to cost Angel 4% of net sales.Net sales made under warranty in 2016 were $180 million.Fifteen percent of the units sold were returned in 2016 and repaired or replaced at a cost of $5.3 million.The amount of warranty expense on Angel's 2016 income statement is:
A)$ 5.3 million.
B)$ 7.2 million.
C)$10.6 million.
D)$27.0 million.

Question

Quizplus · Accepted Answer

The warranty expense is calculated as 4% of the net sales, which is $180 million. Therefore, the warranty expense is 0.04 * $180 million = $7.2 million.

At the Beginning of 2016,Angel Corporation Began Offering a Two-Year