Warranty Cost Provision Calculator

Work out warranty cost provision instantly with clear inputs, formula shown and shareable results.

About Warranty Cost Provision Calculator

A warranty provision is expected claims multiplied by average repair cost, recognised when the product is sold rather than when the claim arrives. The per-unit figure is what belongs in the product cost card, and it must be revised as field failure data accumulates.

Formulas

Expected claims

Claims = Units sold x Expected failure rate %

Provision

Provision = Expected claims x Average repair cost

Worked example

With the default values below, Warranty Cost Provision Calculator returns Warranty provision required of $537,600.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Units sold in the period: 4,800
Expected failure rate within warranty: 3.5
Average repair or replacement cost: 3,200
Existing provision balance: 320,000

Results

Warranty provision required: $537,600.00
Expected warranty claims: 168.0
Top-up needed to the provision: $217,600.00
Provision per unit sold: $112.00

Step by step

1Values used
2Expected claims
3Provision
4Warranty provision required= 537,600.00
5Expected warranty claims= 168.0
6Top-up needed to the provision= 217,600.00
7Provision per unit sold= 112.00

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation or tax into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

When must a provision be recognised?

At the point of sale, because the obligation arises from the sale. Recognising it when claims arrive misstates the period's profit.

How do I estimate the failure rate?

From field data on prior versions, adjusted for design changes. New products with no history need a conservative estimate and early revision.