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What is the estimated warranty cost

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Problem - Automobile batteries to perform sufficiently for as long as the person that owned it keeps the car.

Car industry data show that only 20% of car owners retain their cars for 3 years or more. Data from the past suggest the following data:

# Years Owned

Probability of Battery Failure

Battery Exchange Costs

% Failed Batteries Returned

Less than 3

0.2

$50

75%

3 or more

0.6

$20

50%

Required - If 50,000 batteries were sold this year, what is the estimated warranty cost?

Reference no: EM132462294

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