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Is a manufacturer's product warranty part of its manufacturing overhead or is it part of its SG&A expense?

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Question ajoutée par Rehan Qureshi , Financial Consultant , Self Employeed
Date de publication: 2013/12/26
Rehan Qureshi
par Rehan Qureshi , Financial Consultant , Self Employeed

The costs associated with a manufacturer's product warranty are part of its selling expenses and therefore part of its SG&A expenses.If the future costs of the warranty coverage are probable and can be estimated, they are recorded at the time of the sale. The accounting entry will debit Warranty Expense and will credit Warranty Liability. If the estimated warranty costs are recorded at  the time of the sale, the actual costs of the repair work or the replacement of the product during the warranty period will be debited to the Warranty Liability account---thereby reducing the liability balance.

Mohammad Tohamy Hussein Hussein
par Mohammad Tohamy Hussein Hussein , Chief Executive Officer & ERP Architect , Egyptian Software Group

Warranty is not part of the manufacturing overhead. It is part of SG&A expense.

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