Question

if accrotime guarantees a full refund on any defective watch for 2 years after purchase, what percentage of total

Answer 1

Answer:

A. 0.62%

B. 28 months

Step-by-step explanation:

A. Calculation for what percentage of total production will the company expect to replace

Let x represents the distribution of life times

Let mean be 34 months

Let standard deviation be 4 months.

Based on the information the full refund on any defective watch for 2 years will represent 24 months (2 years *12 months).

First step

P(X<24)

= p(x-mean/ standard deviation< 24-34/4)

= p(z< -10/4)

=P(z<-2.5)

Second step is to Use the excel function to find NORMSDIST(z) of P(z<-2.5)

NORMSDIST(z)=0.62%

Therefore the percentage of total production will the company expect to replace will be 0.62%

B. Calculation for how much the guarantee period should be

First step

P(X<x)=0.06

P(x-Mean/Standard deviation < x-34/4) = 0.06

Second Step is to Use excel function

P(z<x-34/4) = (Normsinv(0.06)

x-34/4 = -1.555

Now let calculate how much the guarantee period should be

x = -6.22+34 months

x = 27.78

x = 28 months (Approximately)

Therefore the guarantee period should be 28 months