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# Excel: Design, Reliability and Warranty

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1. Prepare an analysis of product reliability and MTBF data on the drive-train components for an important line of heavy-duty equipment. The client has been offering a 12-month warranty on the drive-train package but believes that unit volume could be increased by as much as 10% if the warranty can be extended to 18 months.

2. A phone call to Mike Russell, the clients Director of Engineering, reveals that warranty costs average \$40 per episode

a. Your first objective is to determine what percentage of product requires service in the 12-month warranty period assuming service distributed along an Exponential Curve. You determine that figure below and attached:___________________ 24.85%
b. Assuming that the client currently sells an average of 6,380 units monthly, a 10% increase to 7,018 units would increase estimated warranty expense from___________________ to ____________________
Current warranty expenses \$63,422.99
Warranty expenses with extended warranty \$97,848.03
Warranty expense will increase from \$63,422.99 to \$97,848.03 \$34,425.03
c. Based on your earlier work with the results table above you are able to determine the degree of operating income generated by the sales lift and compare it with the increase in warranty expense. That difference is_______________________________
Data not available to answer this. We need profit margins or profits per unit to answer this. Suppose the profit per unit is \$50, then operating income would increase by \$50*638= \$31900. The increase in warranty expense is \$97848.03 - \$63,422.99=\$34,425.03. Hence, the extended warranty expenses are higher than the increase in profits on additional units sold. You can work the same with correct operating income per unit. 31900

d. After the discussion on warranty costs, Russell wants to talk about projected returns on R & D investments. Russell has four high-risk but potentially high pay-off projects in the works and is concerned that he'll draw four 'blanks.' You're quick to assure him that he's made a wise move. Costs, probability of success, and pay-off values are attached:
1) The probability of at least one success is:________________________ 0.90616
2) The probability of at least two successes is:_________________ 0.57328
3) The probability of at least three successes is: 0.19497
4) The probability that all will succeed is: 0.02559
_______________________

#### Solution Preview

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1.    prepare an analysis of product reliability and MTBF data on the drive-train components for an important line of heavy-duty equipment. The client has been offering a 12-month warranty on the drive-train package but believes that unit volume could be increased by as much as 10% if the warranty can be extended to 18 months.

2.    A phone call to Mike Russell, the clients Director of Engineering, reveals that warranty costs average \$40 per episode

a.    Your first objective is to determine what percentage of product requires service in the 12-month warranty period ...

#### Solution Summary

Design, reliability and warranty for Excel are examined. The percentages of products which require services are given.

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