Question

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

Answer 1

After calculating the expected warranty liability by multiplying the estimated defective units by the average repair cost, and subtracting the cost of the repairs already made, we get a remaining liability of $4,810. However, this does not match the provided answer options.

Step-by-step explanation:

The liability for product warranties at the end of the month is calculated based on the estimated defect rate and the average repair cost. With 8% of 1,000 units estimated to be defective, we expect 80 units will require repairs. At $65 per repair, the expected warranty liability is 80 units × $65, which equals $5,200. However, by the end of the month, only six units have been repaired, costing 6 units × $65 = $390. Therefore, we subtract the $390 already spent from the expected total of $5,200 to find the remaining liability, which is $5,200 - $390 = $4,810.

However, the options provided do not match this calculated figure. It is important to reach out for clarification or review the question and calculations to ensure they are accurate before submitting the final answer.

Answer 2

Liability for product warranty at month end is $4810

so correct option is E) None of these

Step-by-step 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