Question
Lithium cells used to power digital watches have a mean lifetime of 8 years with a standard deviation of 1.5 years. The Tempus Watch Company
Lithium cells used to power
digital watches have a
mean lifetime of 8 years
with a standard deviation
of 1.5 years. The Tempus
Watch Company sells a
sealed model of watch with
power cells that are not
replaceable. The watch
costs $9.95, and the
company offers a 5-year
replacement warranty if the
cell fails.
a) What percent of its watches would the
company expect to replace under a
5-year warranty plan?
b) Assume that the company sells 100 000
watches this year, and it costs $5.00 to
replace a defective watch, including
shipping. How much should the
company budget to replace watches
under warranty?
c) An advertising executive suggests
boosting sales by offering a 10-year
warranty. Is this a reasonable idea? Use
calculations similar to parts a) and b) to
provide support for your answer.
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