Answer:
1. The expected cost of production for each tire sold is $0.013 per tire.
2. Probability that Grear will refund more than $50 for a tire is 0.0107
Explanation;
1. Mileage is 36,500 miles
Standard deviation is 5,000 miles
Observed miles is 30,000 miles
100 miles failed at $1
Therefore;
(36,500 - 30,000) /5,000 = 1.3
To get the cost of production,
Since 100 miles equals $1 if fail
1.3 × 1 / 100
= $0.013 per tire.
2. P(Z<25,000 - 36,500/5,000)
= P(Z<-11,500/5,000)
=Z<2.3
Therefore,
1-0.9893
=0.0107
The probability that Grear will refund more than $50 for a tire is 0.0107
