Question 1

**Section A**

Titan Electronics sells appliances with a one-year warranty. Based on past experience, 5% of appliances will have major defects costing $100 to repair, 15% will have minor defects costing $30 to repair, and 80% will have no defects. During the year, Titan sold 10,000 appliances.

What is the expected value of the warranty provision required at the year-end? (Enter numbers only)

Accepted Answer

Calculate the expected cost per unit by multiplying the probability of each defect type by its repair cost. Then multiply the total expected cost per unit by the number of units sold.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the provision based only on the major defects or miscalculating the percentages.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 1

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