SOLUTION: Suppose you work for a company that manufactures electronics. The development analysts estimate that 5% of their flagship product will fail within 2 years of the purchase date, wit

Algebra ->  Probability-and-statistics -> SOLUTION: Suppose you work for a company that manufactures electronics. The development analysts estimate that 5% of their flagship product will fail within 2 years of the purchase date, wit      Log On


   

Question 1195491: Suppose you work for a company that manufactures electronics. The development analysts estimate that 5% of their flagship product will fail within 2 years of the purchase date, with a replacement cost of $1500.
A newly hired associate at the company proposes to charge $ 67 for a 2 year warranty.
Write your review of the proposal and address it to VP of marketing and promotions. Would the proposal benefit the company? Why or why not? Include the new proposed cost, new expected value, interpretation of the new expected value, and explanation of how the new cost was chosen.
Answer by ikleyn(52786) About Me  (Show Source):
You can put this solution on YOUR website!
.
Suppose you work for a company that manufactures electronics. The development analysts estimate that 5% of their flagship product
will fail within 2 years of the purchase date, with a replacement cost highlight%28for_the_company%29 of $1500.
A newly hired associate at the company proposes to charge $ 67 for a 2 year warranty.
Write your review of the proposal and address it to VP of marketing and promotions.
Would the proposal benefit the company? Why or why not? Include the new proposed cost, new expected value,
interpretation of the new expected value, and explanation of how the new cost was chosen.
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            First,  the presented text was not clear to me,
            so  I  edited it to make it clear,  according to my understanding.


            Second, I will not write any proposal or any review.

                      (This forum is not a right place to teach you writing proposals or reviews).

            I simply will solve the associated Math problem.
            The full analysis is actually highlight%28highlight%28ALL%29%29 what is expected and what should be done. 

Let's consider charging $67 for the two-years warranty.

0.05 of the replacement cost of 1500 dollars is  0.05*1500 = 5*15 = 75 dollars for the company.


It is greater than $67, so $67 as the price of the two-years warranty does not cover in full 
the company' spending for the replacement. 
THEREFORE, this proposal is NOT beneficiary for the company.


To be beneficiary for the company, the two-years warranty price must be greater than $75.

Solved.