Strikers,Inc.sells soccer goals to customers over the Internet.History has shown that 2% of Strikers' goals will need repair under the warranty program.For the year,Strikers has sold 4,000 goals and 45 have been repaired.If the estimated cost to repair a goal is $200,what would be the warranty expense for the year?
A)$0.
B)$16,000.
C)$7,000.

Question

Quizplus · Accepted Answer

Based on the historical data, Strikers, Inc. would expect 2% of the 4,000 goals sold to need repairs under the warranty program. This amounts to 80 goals (0.02 x 4,000). At an estimated repair cost of $200 per goal, the total warranty expense for the year would be $16,000 (80 x $200).