Lulzbot.com sells 6000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale warranty contracts are honored on 120 units for a total cost of $6000. What amount should Lulzbot.com accrue on December 31 for estimated warranty costs?
A) $9000
B) $6000
C) $3000
D) $45000

Question

Quizplus · Accepted Answer

The Answer of Lulzbot.com sells 6000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale warranty contracts are honored on 120 units for a total cost of $6000. What amount should Lulzbot.com accrue on December 31 for estimated warranty costs?
A) $9000
B) $6000
C) $3000
D) $45000

LulzbotCom Sells 6000 Units of Its Product for $500 Each