Question 1:

Airtight Manufacturing produces plastic cases that utility companies buy to protect electronic components on utility poles from weather damage.

(a)The protective case currently used by utility companies has a 0.035 probability of cracking or breaking in any given year.When a protective case cracks or breaks, the utility company incurs a $600 expense to repair that utility pole.What is the expected value of the utility company's repair costs per utility pole?Show your work.

(b)Airtight has recently developed a stronger material for its protective case.The use of this stronger material reduces the case's probability of cracking or breaking, and serves as a differentiating factor for estimating this product's VTC.Use the product-needs matrix described in the course to classify this differentiating factor.What type of product characteristic is it?What type of customer need does it satisfy?Justify your answers.

(c)If this stronger material enables Airtight's new protective case to have a 0.015 probability of cracking or breaking in any given year, then what is the value to a utility company of this stronger-material differentiating factor?Show your calculations.

Question 2:

A manufacturer of small electrical products has developed a flashlight bulb that lasts 3 times longer than the bulbs in current pocket flashlights.

In order to help sell flashlights with this improved bulb to a large chain of hardware stores, the manufacturer commissioned a conjoint study in which 650 adult consumers were asked to rank their preferences among a set of alternative pocket flashlight descriptions.The set of alternatives included all combinations of the following two-level variables: the long-lasting bulb versus the ordinary one, a metal versus plastic case, and a $4.99 versus $8.99 price point.A regression analysis was used to determine the results of the study.Dummy-variable coding was used for the bulb and case-type variables.The price variable was coded in dollars.The regression coefficients from the study are as follows:

Variable Regression Coefficient Presence of long-lasting bulb +0.91 Presence of metal case +0.07 Price -0.43