Following an exponential distribution, the average lifespan of a smartphone battery is 2.3 years. The battery manufacturer

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Following an exponential distribution, the average lifespan of a smartphone battery is 2.3 years. The battery manufacturer wants to offer a warranty for its customers to receive a free replacement if the battery fails during the first year. Each battery generates a profit of $10.85, and the replacement cost is $6.35. Develop a Monte Carlo simulation using Analysis ToolPak or R, both with a seed of 1, for 100 battery units sold. 

a. What is the expected total cost of this warranty program? 

b. In order to cover the cost of the warranty program, how many additional battery units does the company need to sell?

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Business Analytics Communicating With Numbers

ISBN: 9781260785005

1st Edition

Authors: Sanjiv Jaggia, Alison Kelly, Kevin Lertwachara, Leida Chen

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