Dougan Company Manufactures and Sells Widgets

Essay

Dougan Company manufactures and sells widgets. Each widget costs $60 and sells for $100. Each widget carries a warranty that provides for free replacement if it fails for any reason during the next 36 months. In the past, 4 percent of the widgets have had to be replaced under the warranty. During May, Dougan sold 2,000 widgets and replaced 150 under warranty. Calculate the product warranty expense for the month. Show your computation.