Question

A company makes a product and has no way to determine which ones are faulty until an unhappy customer returns it. Three percent of the products are faulty and will cost the company $200 each in customer service and repairs. If the company does not refund the customer when repairing the item, how much should the company charge to make a profit of $2.00 per item

Answer 1

Answer:

$8.00 per item

Explanation:

A company makes product and its 3% of products are faulty. There is no other quality inspection test which can identify the faulty products during the manufacturing process. The faulty products are only identified when the customer arrives to return it. The faulty product costs the company $200 each and company wants to make profit of $2.00 per item. It should charge price of $8.00

The calculation is as follows,

let selling price is $x$

$x$ - (0.03 * 200) = 2.00

after rearranging the equation we get;

$x$ = 2 + 6

$x$ = 8