Question

an electric guitar costs $830, with a $225 full - replacement warranty. if the manufacturer sells 532,475 warranties and has to honor 12% of them, how much profit did the manufacturer gain from the warranties?
a. $105,430,050
b. $66,772,365
c. $53,034,510
d. $508,726,615
please select the best answer from the choices provided

Explanation:

Step1: Calculate total revenue from selling warranties

Multiply number of warranties sold by price per warranty.
$532475\times225 = 119806875$

Step2: Calculate number of warranties to be honored

Find 12% of the number of warranties sold.
$0.12\times532475 = 63897$

Step3: Calculate total cost of honoring warranties

Multiply number of warranties to be honored by cost of guitar (since full - replacement).
$63897\times830= 53034510$

Step4: Calculate profit from warranties

Subtract cost of honoring warranties from total revenue from selling warranties.
$119806875 - 53034510=66772365$

Answer:

B. $66,772,365$