Ace Appliances sells dishwashers with a 3-year warranty. They expect 3% of the dishwashers to need repairs in year 1, 7% in year 2 and 15% in year 3. They sell 500 dishwashers in 2009 with the warranty in effect from 2009 to 2011. Each repair is estimated at $40. What is the total estimated warranty payable for Ace regarding the sales in 2009?
A) $5,000
B) $ 600
C) $1,400
D) $3,000

Question

Quizplus · Accepted Answer

3% of 500 dishwashers = 15 dishwashers will need repairs in year 1.7% of 500 dishwashers = 35 dishwashers will need repairs in year 2.15% of 500 dishwashers = 75 dishwashers will need repairs in year 3.Total repairs = 15 + 35 + 75 = 125Total estimated warranty payable = 125 * $40 = $5,000

Ace Appliances Sells Dishwashers with a 3-Year Warranty