Question
A new car battery is sold with a two-year warranty whereby the owner gets the battery replaced free of cost if it breaks down during
A new car battery is sold with a two-year warranty whereby the owner gets the battery replaced free of cost if it breaks down during the warranty period. Suppose an auto store makes a net profit of $20 on batteries that stay trouble-free during the warranty period; it makes a net loss of $10 on batteries that break down. The life of batteries is known to be normally distributed with a mean and a standard deviation of 40 and 16 months, respectively.
a.What is the probability that a battery will break down during the warranty period?(Round your answer to 4 decimal places.)
b.What is the expected profit of the auto store on a battery?(Round your answer to 3 decimal places.)
c.What is the expected monthly profit on batteries if the auto store sells an average of 500 batteries a month?(Round your answer to 2 decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started