Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 10 - Reporting and Analyzing Liabilities - Questions - Page 541: 21


The decision to increase the warranty from 3 years to 10 years will have the following implications a) Increase in cost b) Maintenance of records c) Acceptance in the market.

Work Step by Step

a) The cost of vehicle will increase by the amount to be spent upkeep of vehicles during warranty period. After adding this cost, we have to work out the net income. b) Necessary records have to be maintained for 10 years and according claims of the customers to be entertained. c) A market study needs to be conducted to evaluate the benefits of this change, and can be accepted in case substantial increase in sale is expected.
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