A company estimates that 0.7% of their products will fail after the original warranty period, but within two years of the purchase, with a replacement cost of $350. If they offer a two-year-extended warranty for $48, what is the company's expected value of each warranty sold

The company's expected value of each warranty sold = $45.55

Explanation:

x = Resulting value for the company of replacing a failed product = Price two-year-extended warranty - Replacement cost = $48 - $350 = -$302

y = Resulting value for selling extended warranty to a product that does not fail = Price two-year-extended warranty = $48

Px = Probability of X occurring = 0.7%

Py = Probability of y occurring = 100% - Px = 100% - 0.7% = 99.30%

Therefore, we have:

The company's expected value of each warranty sold = (x * Px) + (y * Py) = ((-$302) * 0.7%) + ($48 * 99.30%) = $45.55

To ensure that the outsourcing initiative succeeds, even as personnel, business needs, and operating conditions change

Explanation:

Outsourcing

This is simply regarded as a form of an arrangement through which one company in contact with another organization mainly to give or provide services that ordinarily could be provided by company employees.

Reasons why organizations outsource

1. To cut costs

2. To improve focus

3. To upgrade capabilities and services

4. Fasten or accelerate time to market etc.

There are several issues associated with outsourcing. They includes:

1. There is the problem of decreasing employee Morale

2. Quality problems

3. Legal issues

3. Negative impact on customer relationships and satisfaction

4. Data security and integrity issues etc.

The objective of outsourcing is to save money and/or provide better service. It aim to lessen or free up development staff to cutoff peaks and valleys in the staffing cycle.