An Entity Sells Goods Under Warranty and Past Experience Shows

question 4

Multiple Choice

An entity sells goods under warranty and past experience shows that minor defects account for 10% of sales and major defects account for 2% of sales. If all minor defects were repaired the warranty cost would be €300 000, and if all major defects were repaired the warranty cost would be €800 000. The expected value of the warranty cost is:

• A) €0;
• B) €22 000;
• C) €46 000;
• D) €86 000.

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Definitions:

Formatting Button

An interface element, often found in software applications, that provides users with options to change the appearance of text, objects, or documents.

Promote

In the context of structured data and outlines, to elevate the rank or level of an item, making it a higher-level entry in a hierarchical structure.

Demote

In outline or hierarchy structures, to lower the rank or position of an item within a structured list or diagram.

Right Tab Stop

A tab stop type in text editing, aligning the text to the right at a set position on the ruler.