Question

A company makes a $5 profit on each non-faulty product it sells. Approximately 2% of the products manufactured are faulty, with no way to discover which ones are faulty before delivery. If replacement-and-repair costs for the faulty products are $100 each, what is the profit per item? a. loss of $15.10 b. loss of $15 c. profit of $2.90 d. profit of $3.00

Answer 1

C ) profit of $2.90 per item.

Explanation:

Answer 2

Let`s assume that there are 100 products.
There are 98 are non- faulty products. Profit: 98 x 5 = $490
Also there are 2 faulty products.
Replacement and repair costs are: 2 x 100 = $200
$490 - $200 = $290
$290 : 100 = $2.90
Answer: C ) profit of $2.90 per item.