document.write( "Question 1203498: A company estimates that 1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $350.\r
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Algebra.Com's Answer #839109 by ikleyn(52788) $\"\"$ $\"About$

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\n" ); document.write( "A company estimates that 1% of their products will fail after the original warranty period
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\n" ); document.write( "so that they'll break even (in other words, so the expected profit will be 0)
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document.write( "The company's cost to replace 1% of their production (which potentially will fail\r\n" );
document.write( "after the original warranty period but within 2 years of the purchase) is\r\n" );
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document.write( "    0.01*350*X  dollars, where X is the rate of produced and sold units per year.\r\n" );
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document.write( "Let z be the extended insurance price in dollars per unit.\r\n" );
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document.write( "In order for the profit be zero, this equation should kept\r\n" );
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document.write( "    0.01*350*X = z*X,\r\n" );
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document.write( "which gives, after canceling factor X in both sides,  z = 0.01*350 = 3.5  dollars per item.\r\n" );
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document.write( "ANSWER. Under given conditions, the extended insurance price is $3.50 per item.\r\n" );
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