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LulzbotCom Sells 6000 Units of Its Product for $500 Each

question 127

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Lulzbot.com sells 6000 units of its product for $500 each during the year ending December 31 2017. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale warranty contracts are honored on 120 units for a total cost of $6000. What amount will be reported on Lulzbot.com's balance sheet as Warranty Liability on December 31 2017?


Definitions:

Annual Subscription

A payment model where customers pay a recurring fee once per year for access to a product or service.

Computer Magazine

A publication focusing on computers, technology trends, software and hardware reviews.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they are incurred.

Manufacturing Company

A manufacturing company is an enterprise that uses raw materials, parts, and components to assemble finished goods on a large scale.

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