Big Top Electronics Inc

question 90

Multiple Choice

Big Top Electronics Inc. offers a two-year warranty on its products. The estimated liability is 4% of sales in the year of sale and 6% in the second year. Sales for 20X0 and 20X1 were: $2,500,000 and $2,800,000, respectively. They incurred no warranty costs in 20X0 but in 20X1 they spent $175,000 on repairs related to the warranties from 20X0 and 20X1.
-Big Top's warranty liability as at the end of the 20X1 year is

• A) $380,000
• B) $355,000
• C) $75,000
• D) $280,000

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Definitions:

Departmentation

The process of dividing an organization into different departments, which perform specific roles or tasks.

Basic Forms

The fundamental shapes or structures from which something can be developed or understood.

Combinations

The act or process of combining two or more elements or entities to form a new, often more complex, total.

Geographic Departmentation

Organizing an entity's structures based on geographical locations, facilitating regional management.