A manufacturer of a certain product can expect that…
We are given that a manufacturer produces 20,000 units and that between 0.3 and 0.5 percent of the units are defective. We also know that each unit is priced $2,500, and we
must determine the range of dollar amounts that the manufacturer will have to refund. We can determine this range in two parts; let’s start with the dollar amount the manufacturer would have to refund if 0.3 percent of the units were defective.
0.3/100 x 20,000
0.3 x 200 = 60 units
Since each unit is priced $2,500, the manufacturer would have to refund 60 x $2,500 = $150,000.
$150,000 represents the least number of dollars that the manufacturer will have to refund. When looking at our answer choices, we see that only answer choice D contains a minimum of $150,000. Thus, we know that answer choice D is correct.