LeMay Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from LeMay Frosted Flakes boxes and $1.

The company estimates that 60% of the boxtops will be redeemed. In 2012, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls.

If the bowls cost LeMay Company $3 each, how much liability for outstanding premiums should be recorded at the end of 2012?

a. $150,000

b. $40,000

c. $60,000

d. $84,000

Question

Business

Beckham Gross

26 May, 11:44

LeMay Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from LeMay Frosted Flakes boxes and $1.

The company estimates that 60% of the boxtops will be redeemed. In 2012, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls.

If the bowls cost LeMay Company $3 each, how much liability for outstanding premiums should be recorded at the end of 2012?

a. $150,000

b. $40,000

c. $60,000

d. $84,000

+3

Answers (1)

Know the Answer?

Clark Hardin · Answer 1

The correct anwer is C. 60.000

Explanation:

First, you have to calculate tthe total expected bowls that LeMay has to buy. In this case is 500.000 * 60% / 4 = 75.000. Then, subtract the expected bowls against the already delivered. In this case 75.000 * 55.000 = 20.000. Finally, multiply by the cost per bowl, to get the outstanding premiums to record: 20.000 * 3 = 60.000