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What expense should the company report in year two

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Question - The Simpson Company sells toasters for $50 each. During Year One, Simpson sold 20,000 toasters. Each toaster has a warranty requiring the company to fix any problems within that occur within 12 months. Company officials believe that 8 percent of the toasters will break in that period and cost $20 each to fix. In Year One, 300 toasters break and are fixed at the anticipated cost. During Year Two another 1,200 of these toasters break; however, they now cost $25 each to fix. What expense should the company report in Year Two in connection with this warranty?

Reference no: EM132478615

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