Warranties
Clearview Company manufactures and sells high-quality television sets. The most popular line sells for $1,300 each and is accompanied by a three-year warranty to repair, free of charge, any defective unit. Average costs to repair each defective unit will be $95 for replacement parts and $60 for labor. Clearview estimates that warranty costs of $36,270 will be incurred during 2014. The company actually sold 1,300 television sets and incurred replacement part costs of $10,200 and labor costs of $15,600 during the year. The adjusted 2014 ending balance in the Estimated Liability for Warranties account is $29,400.
Required:
1. How many defective units from this year's sales does Clearview Company estimate will be returned for repair?
2. What percentage of sales does Clearview Company estimate will be returned for repair?