Final answer:
The manufacturer's profit from selling 475,360 warranties at $17 each and honoring 7.5% of them is calculated by first obtaining the total revenue and then subtracting the total replacement cost, resulting in a profit of $4,908,092.
Step-by-step explanation:
To calculate the profit made from the warranties, we need to consider both the total revenue from the warranties sold and the total cost of replacing microwaves for the warranties that were honored. The student is asked to calculate the profit from selling 475,360 warranties at $17 each and having to honor 7.5% of them.
First, calculate the total revenue from selling the warranties:
- Total Revenue = Number of Warranties × Price per Warranty = 475,360 × $17
Then, determine the number of warranties that need to be honored:
- Warranties Honored = 7.5% of 475,360 = 0.075 × 475,360
Next, calculate the cost of replacing the microwaves for the honored warranties:
- Replacement Cost = Warranties Honored × Cost of One Microwave = Warranties Honored × $89
Finally, subtract the total replacement cost from the total revenue to find the profit:
- Profit = Total Revenue - Total Replacement Cost
Let's do the calculations:
- Total Revenue = 475,360 × $17 = $8,081,120
- Warranties Honored = 0.075 × 475,360 = 35,652
- Replacement Cost = 35,652 × $89 = $3,173,028
- Profit = $8,081,120 - $3,173,028 = $4,908,092
Therefore, the correct answer is c. $4,908,092, which is the profit the manufacturer made from the warranties.