During 2011 Alcom Appliances Sold 400 Appliances Worth $2,000,000

question 63

Short Answer

During 2011 Alcom Appliances sold 400 appliances worth $2,000,000.Each appliance comes with a one-year warranty, which Alcom estimates will cost $75 each.During the year Alcom spent $12,500 on warranty costs for the appliances sold in 2011.At the end of the 2011 the warranty liability and the warranty expense related to these sales would be closest to: $\begin{array}{lll}&\text { Warranty Liability}&\text { Warranty Expense }\\\hline\text { a. } & \$ 17,500 & \$ 12,500 \\\text { b. } & \$ 17,500 & \$ 30,000 \\\text { c. } & \$ 12,500 & \$ 12,500 \\\text { d. } & \$ 30,000 & \$ 30,000\end{array}$

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Definitions:

Dollar Volume

Refers to the total amount of money exchanged in transactions for a particular commodity within a specific timeframe.

Pareto Principle

The principle that states a small percentage of causes (roughly 20%) often lead to a large percentage of effects (approximately 80%).

ABC Analysis

A method of classifying inventory items into categories based on their importance, such as value or turnover rate, to optimize inventory management.

Inventory Savings

Reductions in the cost associated with holding and managing inventory, typically achieved through more efficient inventory management practices.