Robertson Corp

question 61

Multiple Choice

Robertson Corp. uses the revenue approach to account for warranties. During 2020, the company sold $ 750,000 worth of products, all of which carried a two-year warranty (included in the price) . It was estimated that 2% of the selling price represented the warranty portion, and that 40% of this related to 2020, and 60% to 2021. Assuming that Robertson incurred costs of $ 5.500 to service the warranties in 2021, what is the net warranty revenue (revenue minus warranty costs) for 2021?

• A) $ 3,500
• B) $ 9,500
• C) $ 5,500
• D) $ 9,000

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Definitions:

First-in

This principle dictates that the earliest goods to be added to inventory are the first ones to be removed from it, commonly applied in financial and inventory management.

Conversion Costs

The sum of labor and overhead costs that are necessary to convert raw materials into finished products.

Equivalent Units

Equivalent units is a concept in cost accounting used to allocate costs to partially completed goods, converting them into the amount of finished goods units.

Weighted-average

A calculation that takes into account the varying degrees of importance or quantities of different items in a data set, providing a figure that reflects their proportional contributions.