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The Athletic Accountant Company produces exercise equipment for accountants. Its main product, the Pencil-Pusher Push-Up Platform, is sold with a...

The Athletic Accountant Company produces exercise equipment for accountants. Its main product, the Pencil-Pusher Push-Up Platform, is sold with a three-year warranty against defects. The company expects that 1% of the units sold will prove to be defective in the first year after they were sold, 2% will be prove defective in the second year, and 3% of the units sold will prove to be defective in the third year. The average cost to repair or replace a defective unit under the warranty is expected to be $50

Units sold Actual costs of
repairs and replacements
under the warranty plan
2006 9,000 units $ 5,000 cost
2007 12,000 units $ 16,000 cost
2008 17,000 units $ 37,000 cost

Calculate the amount of warranty expense that should have ben recognized in 2007

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