Let x be the required waranty period, then P(X < x) = P(z < (x - 12)/(8/12)) = 1 - 0.067 = 0.933 P(z < 12(x - 12)/8) = P(z < 1.498) 12(x - 12)/8 = 1.498 x - 12 = 8(1.498) / 12 = 0.9987 x = 12 - 0.9987 = 11
Therefore, they should waranty for 11 years so that no more than 6.7% fail within that time.
cost of production = %13 Let the price be p, then revenue less price of failed iron = p - 0.067(13) = p - 0.871 Profit = p - 0.871 - 13 = 5 p - 13.871 = 5 p = 5 + 13.871 = 18.871
Therefore, the should charge $18.87 per waffle iron.
