Change equation warranty easily

Aug 6th, 2022
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How to change equation warranty

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[Music] so at richie implement we look at our warranty recovery rates based on individual technicians as we go through the year were looking at cumulative hours build out on warranty tickets versus the hours that are paid by our oems and thats where we look for our gaps they show really quickly we do know that some of the warranty jobs are going to be a little bit short um the the oems just a little bit light on their times and we kind of account for those but on an average if weve got uh technician a thats thats getting paid out 100 of their hours we know were were being pretty successful on the training and giving them the right tools to get it done with their efficiencies if we have a tech b thats uh maybe 80 80 percent payout on our hours for warranty then we know we got to really sit down and work with them a little bit more on you know what is the process of tip to tail finishing are they coming up to the front to get more parts uh instead of planning their whole day ahe

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To estimate the warranty expense for a company, we need to know three main things: Number of units sold during a particular accounting period. Percentage of the sold products that will probably need a repair or a replacement based on previous experiences. Average cost of repairing or replacing products under warranty.
A warranty is a promise to your customers that you want a long-term relationship with them. It is an assurance that you stand behind your product quality and want the product to be used for a long time.
To calculate the warranty expense, first figure out how many products will need repair or replacement: Total number of units sold X Percentage of units that are defective. Units needing repair or replacement X cost per unit to repair or replace. 14 water bottles x $4 per water bottle = $56 cost of inventory.
To calculate the warranty expense, first figure out how many products will need repair or replacement: Total number of units sold X Percentage of units that are defective. Units needing repair or replacement X cost per unit to repair or replace. 14 water bottles x $4 per water bottle = $56 cost of inventory.
An extended warranty price represents a percentage of the total product cost. As a general rule of thumb, you shouldnt spend more than 30% of the product cost on a product warranty.
Example of a Warranty Liability ABC Company sells blue widgets. It has historically experienced a warranty expense of 0.1% of sales. In the current period, it sold $500,000 of blue widgets, so it records a debit of $500 to the warranty expense account and $500 to the warranty liability account.
An extended warranty price represents a percentage of the total product cost. As a general rule of thumb, you shouldnt spend more than 30% of the product cost on a product warranty.
How to calculate warranty expenses Find the total number of products sold. Determine the percentage of defective products. Calculate the number of products needing replacement. Evaluate the cost of product replacement. Estimate the total warranty expense.
Expense Warranty (Accrual) approach if the warranty is inseparable from the product being sold and warranty costs are probable and can be reasonably estimated, accrue these costs as a liability in the year of sale.
Accrue the warranty expense with a debit to the warranty expense account and a credit to the warranty liability account. As actual warranty claims are received, debit the warranty liability account and credit the inventory account for the cost of the replacement parts and products sent to customers.

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