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You Are the Controller of a Large Auto Dealership That

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Essay

You are the controller of a large Auto dealership that offers customers a three year, 60,000 km, bumper to bumper warranty at no extra cost, or customers may purchase an extended warranty that provided bumper to bumper coverage for 5 years or 100,000 km. In reviewing the year-end financial statements the General Manager notices that you have accounted for these two warranties differently. Provide the GM with an explanation of these two types of warranties and how the warranties are accounted for.


Definitions:

Price Elasticity

An indicator that measures the impact of price change on the demand for a good.

Cannondale Mountain Bike

Cannondale Mountain Bike is a specific type of bicycle designed for off-road cycling, produced by the Cannondale Bicycle Corporation, known for its innovation and quality.

Bicycle

A human-powered, pedal-driven vehicle with two wheels attached to a frame, one behind the other.

Complements

Pairs of goods for which a rise in the price of one good leads to a decrease in the demand for the other good.

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