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Shear Company Sells Computer Equipment with a 2-Year Warranty

Question 17

Multiple Choice

Shear Company sells computer equipment with a 2-year warranty.Prior experience indicates that costs associated with this warranty average 1% in the first year and 2% in the second year.In 2018,Shear had sales of $1,800,000.It paid $250,000 for materials and labour to make warranty-related repairs in 2018.What amount should the warranty expense for 2018 be?


A) $18,000
B) $36,000
C) $54,000
D) $250,000

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