Inline Incorporated manufactures skates and equipment for in-line skating. The company offers a one-year warranty on all products. During 2012, the company recorded net sales of $3,800 million. Historically, about 2% of all sales are returned under warranty and the cost of repairing and or replacing goods under warranty is about 50% of selling price. Assume that at the start of the year Inline's balance sheet included an estimated warranty liability of $17 million and at the end of the year, the accrued warranty liability balance was $13 million.
a. Calculate Inline's warranty expense for 2012.
b. How much did Inline pay during 2012 to repair and or replace goods under warranty?