Computer Inc

question 43

Multiple Choice

Computer Inc. sells equipment with a 3-year warranty. Prior experience indicates that costs for warranty repairs average 3% in the first year, 2% in the second year and 1% in the third year. In 2013, Computer had sales of $800,000. It paid $20,000 for materials and labour to make warranty-related repairs in 2013. What amount will be recorded as warranty expense in 2013?

• A)$16,000
• B)$24,000
• C)$28,000
• D)$48,000

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Definitions:

Corporate Tax Rate

The percentage of a corporation's profit that is paid as tax to the government.

After-Tax Cash Outlay

The net cash expense after adjusting for taxes, often relevant in capital budgeting and investment analysis.

Book Value

The net value of a company's assets minus its liabilities, as recorded on the balance sheet.

Incremental Impact

Refers to the additional effects or outcomes resulting from a specific action or decision in comparison to doing nothing or choosing an alternative.