Mathematics, 02.06.2021 01:50 shamiahG
A retailer offers an extended warranty on a new refrigerator. The cost of the warranty is $55.
The warranty stipulates that the retailer will replace the refrigerator if any failure occurs during the warranty period.
It is estimated that the probability of product failure during the warranty period is 2.5%, and that the cost of replacing the refrigerator is $1100. On average, are new refrigerator extended warranties profitable for the retailer? Explain.
a) What is the probability of the product not failing in the warranty period?
b) What is the net cost of replacement for the company?
c) On average, what is the revenue made on each extended warranty sold?
d) Out of 10,000 refrigerators, how many failures in the warranty period would be expected?
Answers: 3
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A retailer offers an extended warranty on a new refrigerator. The cost of the warranty is $55.
The...
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