Exercise 11-05 a-c (Part Level Submission) Waterway Company sells automatic can openers under a 75-day warranty for defective merchandise. Based on past experience, Waterway estimates that 3% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective unit is $20. The units sold and units defective that occurred during the last 2 months of 2020 are as follows. Month Units Sold Units Defective Prior to December 31 November 31,600 632 December 33,600 420