Capture Co. was organized to sell a single product that carries a 45-day warranty against defects. Engineering estimates indicate that 7% of the units sold will prove defective and require an average repair cost of $ 35 per unit. During Capture's first month of operations, total sales were 500 units; by the end of the month, twelve defective units had been repaired. The liability for product warranties at month-end should be

A. $ 420.

B. $ 805.

C. $ 1,645.

D. $ 1,225