Jamison Company Uses IFRS for Its Financial Reporting $\bullet$ 3,000 Units Were Sold During the Year

question 79

Multiple Choice

Jamison Company uses IFRS for its financial reporting. It produces machines that sell globally. All sales are accompanied by a one-year warranty. At the end of the year, the company has the following data: $\bullet$ 3,000 units were sold during the year. $\bullet$ The trend over the past five years has been that 4% of the machines were defective in some way and had to be repaired. Of this 4%, half required a full replacement at a cost of $3,000 per unit and half were able to be repaired at an average cost of $300.What is the expected value of the warranty cost provision?

• A) $360,000
• B) $198,000
• C) $396,000
• D) $180,000

---

Definitions:

Demand Elastic

Referring to a situation where the quantity demanded of a good or service significantly changes in response to a change in its price.

Price-Elasticity Coefficient

A numeric value that measures how much the quantity demanded of a good responds to a change in the price of that good, indicative of its price sensitivity.

Price Reduction

A decrease in the selling price of goods or services, often intended to stimulate demand or respond to competitive market pressures.

Price Elasticity

The measure of how responsive the quantity demanded or supplied of a good or service is to a change in its price.