# mangement science the art of modeling w/ spreadshe

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Five years ago, an automobile manufacturer started offering an extended warranty to buyers of its sport-utility vehicle.Â Â The extended warranty covered defects occurring after the initial three-year warranty expired.Â Â Of the 10,000 people who bought the sport-utility vehicle in the first year of the program, 15% purchased the extended warranty.Â Â In the Warranty Department, you have recently received data on a random sample of 200 of the cars sold in the first year that the extended warranty was available. For this sample, the average extended-warranty expenditure per car for the one-year period after the initial warranty elapsed was \$350., with a standard deviation of \$100.
a.Â Â What is a 95 percent confidence interval for the mean one-year extended-warranty expenditure per automobile?
b.Â Â At its introduction, the extended warranty was priced at \$224 per year per automobile.Â Â Compute a 95 percent confidence interval for the one-year profitability of the extended warranty.
c.Â Â How large a sample would the Warranty Department require if it wanted its 95 percent confidence interval for the mean warranty expenditure to be no more than+_\$5

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