Question

A complete desktop computer costs $965. A replacement monitor costs $238, a replacement hard drive costs $260, a replacement outer case costs $145, labor to repair it costs $77, and shipping it to and from a repair center costs $41. A full warranty, which covers the entire cost of repairing the computer, is 35% of the purchase price. A limited warranty, which only covers internal parts and labor, costs 11% of the purchase price. If the computer tower is damaged, requiring a new hard drive, new case, labor, and shipping, which warranty will be the better deal, and by how much?
a.
The limited warranty will end up costing the consumer $190.60 less.
b.
The limited warranty will end up costing the consumer $45.60 less.
c.
The full warranty will end up costing the consumer $317.10 less.
d.
The full warranty will end up costing the consumer $192.40 less.

Answer 1

Limited warranty cost = 0.11(965) = $106.15. Full warranty cost = 0.35(965) = $337.75.

With the damage, needed replacements/costs: hard drive $260, case $145, labor $77, shipping $41.
- Full warranty covers everything → total cost = $337.75.
- Limited warranty covers internal parts and labor (hard drive $260 and labor $77) but not case or shipping → out‑of‑pocket repair = $145 + $41 = $186. Total cost = $106.15 + $186 = $292.15.

Difference = $337.75 − $292.15 = $45.60. So the limited warranty is better by $45.60.

Answer: b.