Transcript The Grear Tire Company

The X Tire Company
Problem
A Business Application
• Suppose that the X Tire Company has just
developed a new steel-belted tire that will be
sold through a national chain of discount stores.
X’s management believes that the mileage
guarantee offered with tire will be an important
factor in the acceptance of the product. Before
finalizing the tire mileage guarantee policy, X’s
management would like some probability
information concerning the number of miles the
tires will last.
X Tire Problem
• From actual road tests with tires, X’s
engineering group has estimated the
mean tire mileage at 36,500 miles and the
standard deviation at 5000 miles. In
addition the data collected indicate that a
normal distribution is a reasonable
assumption.
X Tire Problem
• Using the normal distribution, what
percentage of the tires can be expected to
last more than 40,000 miles? In other
words, what is the probability that the tire
mileage will exceed 40,000 miles??
X Tire Problem
• Let us assume that X is considering a
guarantee that will provide a discount on
an new set of tires if the original tires do
not exceed the mileage stated in the
guarantee.
• What should the guarantee mileage be if X
would like no more than 10% of the tires to
be eligible for the discount guarantee?