Question

The manufacturing cost of an air-condioning unit is $544, and the full-replacement extended warranty costs $113. If the manufacturer sells 506,970 units with extended warranties and must replace 20% of them as a result, how much will the replacement costs be? (Note: Assume manufacturing costs and replacement costs are the same.)
a.
$55,158,336
b.
$11,457,522
c.
$2,129,274
d.
$66,717,252

Answer 1

Number replaced = 20% of 506,970 = 0.2 × 506,970 = 101,394 units.
Replacement cost = 101,394 × $544 = $55,158,336.

Answer: a. $55,158,336