Kalvane sold 12,000 units dishwashers with a two-year warranty in 20X5. Based on its history, 6% of the appliances will need a minor repair (40 each), 1.5% a major repair (220 each) and 0.5% a replacement (500 each); the others will have no defect. Compute the warranty provision at 31 December 20X5 (the effect of discounting is not material).
- Appliances sold under warranty
- 12,000
- Proportion of minor repairs (%)
- 6 %
- Cost of a minor repair
- 40
- Proportion of major repairs (%)
- 1.5 %
- Cost of a major repair
- 220
- Proportion of replacements (%)
- 0.5 %
- Cost of a replacement
- 500