Question

7) Your employer, Woodbridge Electric Inc., wants to offer a warranty on the new compact fluorescent light bulb that they have produced and tested. You are called into a meeting and operational experts provide the following data: mean bulb life = 8000 hours, standard deviation = 400 hours (assume a normal distribution). The financial people tell you that the firm cannot afford to replace more than 2.5% of the bulbs under warranty. Some members of the board of directors are pressuring you to come up with a warranty of 7000 hours. The marketing people are pressuring you to create a warranty of 7500 hours. Use the data and adhere to the 2.5% financial constraint above to make your calculations and recommend the highest warranty that you can. What do you recommend as a warranty?

Answer 1

Z = (score-mean)/SD

Find table in the back of your statistics text labeled something like "areas under normal distribution" to find the proportion/probability (.025) and its Z score. Insert into equation above to come to your decision.