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 $ 1200. A newly hired associate at the company proposes to charge $ 50 for a 2-year warranty. 1. Compute the expected value of this proposal. Let X be the amount profited or lost (by the company) on the warranties and P(X) is the probability. 2. Interpret the expected value in complete sentences.

Answers

Answer 1
I’m not sure but I tried
Answer 2

The expected value of the proposal is -$10. This means that, on average, the company can expect to lose $10 per warranty sold.

Interpretation of the expected value:

The expected value of -$10 indicates that, on average, for every 2-year warranty sold, the company can expect to lose $10. This means that the proposal is not a profitable venture for the company. The replacement costs of the 5% of failed products are higher than the revenue generated by selling the warranties and cannot cover the potential losses.

To compute the expected value of the proposal, we need to calculate the amount profited or lost (X) by the company on the warranties and the probability (P(X)) of each outcome.

Now, we have,

The product doesn't fail within 2 years, and the company earns $50 from the warranty.

The product fails within 2 years, and the company incurs a replacement cost of $1200 but keeps the $50 warranty fee.

The probability of the product not failing within 2 years is 1 - 0.05 = 0.95,

and the probability of the product failing within 2 years is 0.05.

Now, we have to find the expected value (E(X)):

[tex]E(X) = P(X_1) * X_1 + P(X_2) * X_2[/tex]

Where:

[tex]P(X_1)[/tex] = Probability of the product not failing within 2 years = 0.95

[tex]X_1[/tex] = Amount profited when the product doesn't fail within 2 years = $50

[tex]P(X_2)[/tex] = Probability of the product failing within 2 years = 0.05

[tex]X_2[/tex] = Amount lost when the product fails within 2 years = -$1150 (Replacement cost of $1200 - $50 warranty fee)

E(X) = 0.95 * $50 + 0.05 * (-$1150)

E(X) = $47.50 - $57.50

E(X) = -$10

The expected value of the proposal is -$10. This means that, on average, the company can expect to lose $10 per warranty sold.

Interpretation of the expected value:

The expected value of -$10 indicates that, on average, for every 2-year warranty sold, the company can expect to lose $10. This means that the proposal is not a profitable venture for the company. The replacement costs of the 5% of failed products are higher than the revenue generated by selling the warranties and cannot cover the potential losses. As a result, the company might want to reconsider the pricing of the warranty or look for other ways to reduce the potential costs associated with the product failures.

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Related Questions

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That would be 36 + -53 = -17 is -53

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Answer:

n=10

Step-by-step explanation:

You need n to be 10 because: y^20= (y^10)^2

Answer:

n = 10

Step-by-step explanation:

(2x⁹yⁿ) * (4x²y¹⁰) = 8 x¹¹ y²⁰

use the rules of exponents to simplify the expression.

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use the commutative property of multiplication

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add exponents of the same base:

8 x⁹ ⁺ ²  y ⁿ ⁺ ¹⁰

back to original equation:

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therefore

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Four students were discussing how to find the unit rate for a proportional relationship. Which method is valid?
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Answer:

The correct answer I believe is A.

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Step-by-step explanation:

I took the test on edge :)

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A

Step-by-step explanation:Lol

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Answer:

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a=(16-44)/3= -9.333m/s²

Find the volume of a cylinder with the height 25cm and radius 5cm

Answers

Answer:

= 1963.5cm³

Step-by-step explanation:

radius=5

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V=πr2h=π·52·25≈ 1963.49541cm³

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Answers

What do you need exactly

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Answers

Answer:

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Step-by-step explanation:

5-13=-8

or

f(1)=5x-13=-8

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Answers

Step-by-step explanation:

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Step-by-step explanation:

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Answers

Answer:

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Answer:

No Solution

Step-by-step explanation:

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1) Elimination  or

2) Substitution

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Answers

Answer:

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Step-by-step explanation:

Choose the most appropriate name for the function:
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Answers

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Answers

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Answers

Answer:

Step-by-step explanation:

16=k

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21
Find an equation of the line containing the given pair of points.
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Answers

The answer is 8y=3x+28

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Answers

1/6 (if it’s a regular dice you’re talking about.

Answer:

1/6

Step-by-step explanation:

So asuming that she didn't roll a biased die the probability of getting a three is 1/6

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HOPE THIS HELPED

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Answers

Answer:

False

Step-by-step explanation:

Answer:

false

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Fruits and vegatables have leaves too, but yet there not a tree

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Answers

Answer:12.50×20

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12.50. ×20=67.50

20 +12.50x =67.50

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Answers

g(-4) means inputing -4 into x. So you will be replacing x with -4 in order to find a y for that input (-4). So...

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Chris can be paid in one of two ways. Plan A is a salary of $400 per month, plus
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Answers

Answer:

$7300

Step-by-step explanation:

For Chris to select plan A, Plan A salary should be greater than that of plan B. Let the amount of sales be x

[tex]400 + \frac{7}{100} x > 692 + \frac{3}{100} x \\ \frac{7}{100} x - \frac{3}{100} x > 692 - 400 \\ \frac{4}{100} x > 292 \\ x > 7300[/tex]

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Answers

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Step-by-step explanation:

1/10 which means that 2/9 Was the wrong answer

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Answers

Answer:

hello your question is incomplete here is the complete question

write the expression as the sine, cosine,  or tangent of an angle.

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Step-by-step explanation:

To write the expression as the sine,cosine or tangent of an angle we will employ the trigonometry identity

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Answers

this statement is false.

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Answers

Answer:

Let Elga's Age be x and Alvin's age be 3x

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4x = 116

x = 116/4

x = 29

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