Question

Marigold Corp. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Marigold $5 each. Marigold estimates that 40 percent of the coupons will be redeemed. Data for 2020 and 2021 are as follows: 2020 2021 Bags of dog food sold 480000 590000 Leashes purchased 19000 22000 Coupons redeemed 100000 150000 The premium liability at December 31, 2021 is

Answer 1

Step-by-step explanation:

Premium liability of 2020

(480000 x .4 - 100000)x 1/8 x 5

= 57500

Premium liability of 2021

(590000 x .4 - 150000) x 1/8 x 5

= 53750

Total liability at 2021

= 57500 + 53750

= 111250