Expedition Camera Co. was organized to sell a single product that carries a 45-day warranty against defects. Engineering estimates indicate that 4% of the units sold will prove defective and require an average repair cost of $25 per unit. During Expedition’s fi rst month of operations, total sales were 900 units; by the end of the month, 15 defective units had been repaired. The liability for product warranties at month-end should be

a. $1,275.

d. $900.

b. $375.

e. none of these.

c. $525.