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What amount of provision should be made

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Reference no: EM133012603

After the first 2 months of purchase, a company that sells goods gives a warranty for the cost of repairs in case the goods sold have defects.

Past experience suggests:

1. 88% of the goods sold will have no defects
2. 7% will have minor defects
3. 5% will have major defects

If minor defects were detected in all products sold, the cost of repairs will be ?24,000; if major defects were detected in all products sold, the cost would be ?200,000.

Problem 1: What amount of provision should be made?

a. ?11000

b. ?11680

c. ?12000

d. ?12680

Reference no: EM133012603

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