Camping Co. was organized to sell a single product that carries a 45-day warranty against defects. Engineering estimates indicate that 8% of the units sold will prove defective and require an average repair cost of $ 65 per unit. During Camping's first month of operations, total sales were 1, 000 units; by the end of the month, six defective units had been repaired. The liability for product warranties at month-end should be:________
A) $1,700
B) $1.300
C) $1.500
D) $200
E) None of these

Question

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DeniceSandidge DeniceSandidge · Answer 1 · 2019-11-15T07:18:54+01:00

Answer:

Liability for product warranty at month end is $4810

so correct option is E) None of these

Explanation:

given data

time = 45 days

defective = 8%

average repair cost = $65 per unit

total sales = 1,000 units

repaired = 6 unit defective

to find out

liability for product warranties at month end

solution

we know that First Month Sales units = 1,000

and First month estimated liability in units @8 % is = 80

and here Defective Units already repaired is 6

Additional liability in unit is = 80 - 6 = 74

and Additional liability @$65 per unit will be = 74 × 65 = 4810

So Liability for product warranty at month end is $4810

so correct option is E) None of these