Replacement times for cell phones are normally distributed w

Replacement times for cell phones are normally distributed with a mean of 7.1 years and a standard deviation of 1.4 years. A company knows they will have customer returns for some of their phones (defective ones). They decide they only want to reimburse for 7% of those products that are returned. What length of time must they set as their warranty period? (Show work).

Solution

Mean = 7.1 years

std dev = 1.4 years

length of time should be such that prob for reimbursement is less than or equal to 7%

P(Z

z value = 1.47

x value = 7.1+1.47(1.4)

= 7.1+2.058

= 9.158 years

Hence 9.158 years can be set as warranty period.