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OG2016 - A manufacturer of a certain

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boomgoesthegmat Senior | Next Rank: 100 Posts Default Avatar
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OG2016 - A manufacturer of a certain

Post Sun May 01, 2016 9:33 am
A manufacturer of a certain product can expect that between 0.3 percent and 0.5 percent of the units manufactured will be defective. If the retail price is $ 2,500 per unit and the manufacturer offers a full refund for defective units, how much money can the manufacturer expect to need to cover the refunds on 20,000 units?

(A) Between $15,000 and $25,000
(B) Between $30,000 and $50,000
(C) Between $60,000 and $100,000
(D) Between $150,000 and $250,000
(E) Between $300,000 and $500,000

OA: D

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OptimusPrep Master | Next Rank: 500 Posts
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Post Mon May 02, 2016 7:21 pm
boomgoesthegmat wrote:
A manufacturer of a certain product can expect that between 0.3 percent and 0.5 percent of the units manufactured will be defective. If the retail price is $ 2,500 per unit and the manufacturer offers a full refund for defective units, how much money can the manufacturer expect to need to cover the refunds on 20,000 units?

(A) Between $15,000 and $25,000
(B) Between $30,000 and $50,000
(C) Between $60,000 and $100,000
(D) Between $150,000 and $250,000
(E) Between $300,000 and $500,000

OA: D
Range of defective units = 0.3% of 20,000 to 0.5& of 20,000 = (60, 100)
Price range of returns = (60*2500, 100*2500) = (150000, 250000)

Correct Option: D

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Post Sun May 01, 2016 1:45 pm
boomgoesthegmat wrote:
A manufacturer of a certain product can expect that between 0.3 percent and 0.5 percent of the units manufactured will be defective. If the retail price is $ 2,500 per unit and the manufacturer offers a full refund for defective units, how much money can the manufacturer expect to need to cover the refunds on 20,000 units?

(A) Between $15,000 and $25,000
(B) Between $30,000 and $50,000
(C) Between $60,000 and $100,000
(D) Between $150,000 and $250,000
(E) Between $300,000 and $500,000

OA: D
Let's first determine the lower end of the range. So, we'll find 0.3 percent of 20,000
We know that 1% of 20,000 is 200, which means 0.1% of 20,000 is 20
If 0.1% of 20,000 is 20, then 0.3% of 20,000 is 60
So, at the lower end, there will be 60 defective units.
If each unit costs $2500, then the lower end of refunds = (60)($2500) = $150,000

Check the answer choices...D!

Cheers,
Brent

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