Ace Appliances Sells Dishwashers with a 3-Year Warranty

Multiple Choice

Ace Appliances sells dishwashers with a 3-year warranty. They expect 3% of the dishwashers to need repairs in year 1, 7% in year 2 and 15% in year 3. They sell 500 dishwashers in 2009 with the warranty in effect from 2009 to 2011. Each repair is estimated at $40. What is the total estimated warranty payable for Ace regarding the sales in 2009?

A) $5,000
B) $ 600
C) $1,400
D) $3,000