Blast Sells Portable CD Players, and Each Unit Carries a One-Year

question 98

Multiple Choice

Blast sells portable CD players, and each unit carries a one-year replacement warranty. The cost of repair defects under the warranty is estimated at 10% of the sales price. During May, Blast sells 650 portable CD players for $50 each. For what amount in May would Blast debit Product Warranty Expense?

• A) $3,250
• B) $1,625
• C) $650
• D) $1,300

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Definitions:

Target Profit

The desired amount of profit a company aims to achieve within a specific period.

Unit Sales

A measurement of the total quantity of units of a product sold by a company.

Contribution Margin

The sum left over from sales income once all variable costs are subtracted.

Fixed Expenses

Costs that do not change with the level of production or sales over a certain time period, such as rent, insurance, and salaries.