Question

A vacuum cleaner costs $68, and the full-replacement extended warranty costs $22. If the manufacturer sells 360,920 vacuum cleaners under warranty and must replace 15% of them to honor the warranties, how much will the replacement costs be?
a.
$4,258,856
b.
$3,681,384
c.
$1,191,036
d.
$6,749,204

Answer 1

Number replaced = 360,920 × 0.15 = 54,138.

Replacement cost = 54,138 × $68 = $3,681,384.

Answer: b. $3,681,384