Safe TravelSafe Travel

produces car seats for children from newborn to 2 years old. The company is worried because one of its competitors has recently come under public scrutiny because of product failure. Historically,

Safe TravelSafe Travel's

only problem with its car seats was stitching in the straps.

Safe TravelSafe Travel

has discovered a more serious problem with the plastic core of its car seats. An accident can cause the plastic in some of the seats to crack and break, resulting in serious injuries to the occupant. It is estimated that this problem will affect about

250250

car seats in the next year. This problem could be corrected by using a higher quality of plastic that would increase the cost of every car seat produced by

$ 25$25.

If this problem is not corrected,

Safe TravelSafe Travel

estimates that out of the

250250

accidents, customers will realize that the problem is due to a defect in the seats in only

sixsix

cases.

Safe TravelSafe Travel's

legal team has estimated that each of these

sixsix

accidents would result in a lawsuit that could be settled for about

$ 675 comma 000$675,000.

All lawsuits settled would include a confidentiality clause, so

Safe TravelSafe Travel's

reputation would not be affected.Read the requirements

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.

Requirement 1. Assuming that

Safe TravelSafe Travel

expects to sell

175 comma 000175,000

car seats next year, what would be the cost of increasing the quality of all

175 comma 000175,000

car seats?

				Cost of increasing
Cost per seat for higher quality plastic	x	# of seats sold	=	quality of plastic
$25	x	175,000	=	$4,375,000

Requirement 2. What will be the total cost of the lawsuits next year if the problem is not corrected?

				Total cost
Cost per lawsuit	x		=	of lawsuits
	x		=