Toyboy (Pty) Ltd is a small company in the Cape, it manufactures household light fittings and sells to the public. It has a policy to refund purchases to dissatisfied customers within six months from date of purchase. Based on past experience, 70% of all goods sold had no defects. it would cost the company R100 000 to repair 75% of all items sold, and R40 000 to repair 25% of all iters sold. 25% of goods sold had minor defects. Goods having major defects made up 5% of goods sold which would cost them R10 000 to repair. Required: Calculate the estimated provision for warranty repairs for the year ended 31 December 2019, based on the expectations of management. Show all calculations.
Toyboy (Pty) Ltd is a small company in the Cape, it manufactures household light fittings and sells to the public. It has a policy to refund purchases to dissatisfied customers within six months from date of purchase. Based on past experience, 70% of all goods sold had no defects. it would cost the company R100 000 to repair 75% of all items sold, and R40 000 to repair 25% of all iters sold. 25% of goods sold had minor defects. Goods having major defects made up 5% of goods sold which would cost them R10 000 to repair. Required: Calculate the estimated provision for warranty repairs for the year ended 31 December 2019, based on the expectations of management. Show all calculations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Toyboy (Pty) Ltd is a small company in the Cape, it manufactures household light
fittings and sells to the public. It has a policy to refund purchases to dissatisfied customers within six months from date of purchase. Based on past experience, 70% of all goods sold had no defects. it would cost the company R100 000 to repair 75% of all items sold, and R40 000 to repair 25% of all iters sold. 25% of goods sold had minor defects. Goods having major defects made up 5% of goods sold which would cost them R10 000 to repair.
Required:
Calculate the estimated provision for warranty repairs for the year ended 31 December 2019, based on the expectations of management. Show all calculations.
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