Mott Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Mott $2.00 each. Mott estimates that 40% of the coupons will be redeemed. Data for 2010 and 2011 are as follows:
2010 2011
Bags of dog food sold 500,000 600,000
Leashes purchased 18,000 22,000
Coupons redeemed 120,000 150,000
The estimated liability for premiums at December 31, 2011 is $11,250.
$21,250.
$22,500.
$42,500.