Use the Following Information for Questions 40-42

question 24

Multiple Choice

Use the following information for questions 40-42.
Melman Microscopes Inc. offers a two-year warranty against failure of its products. The estimated liability is 1.5% in the year of sale and 3% in the second year. Sales and actual warranty expense for 2016 and 2017 were:
-The warranty liability on the December 31, 2016 balance sheet was

• A) $47,500.
• B) $105,000.
• C) $110,000.
• D) $157,500

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Definitions:

Activity-based Costing

Activity-based costing allocates overhead costs based on the specific activities that contribute to overhead in producing a product or service.

Processing Batches

Groups of items or units processed together in one operation to improve efficiency, often in manufacturing or data processing contexts.

Activity-based Costing

A costing method that assigns overhead and indirect costs to related products and services based on their usage of activities.

Overhead Cost

General expenses related to the operation of a business that are not directly tied to a specific product or service, including rent, utilities, and administrative expenses.