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?

Accepted Solution

Answer:$3,681,384.Step-by-step explanation:A vacuum cleaner costs = $68 and replacement extended warranty costs = $22Total sale of vacuum cleaners under warranty = 360,920Vacuum cleaners must replace = 15%First we calculate the number of vacuum cleaners that need to be replace15% Γ— 360,920= 0.15 Γ— 360,920 = 54,138Since these vacuum cleaners need to be replaced free of cost to the consumers, the cost to the company will be selling price of the units.Therefore, cost of replacement = 54,138 Γ— 68 = $3,681,384The cost of replacement would be $3,681,384.