United Electric (UE) sells refrigerators for $400 with a 1-year warranty. The warranty works as follows. If any part of the refrigerator fails during the first year after purchase, UE replaces the...

United Electric (UE) sells refrigerators for $400 with a 1-year warranty. The warranty works as follows. If any part of the refrigerator fails during the first year after purchase, UE replaces the refrigerator for an average cost of $100. As soon as a replacement is made, another 1-year warranty period begins for the customer. If a refrigerator fails outside the warranty period, we assume that the customer immediately purchases another UE refrigerator. Suppose that the amount of time a refrigerator lasts follows a normal distribution with a mean of 1.8 years and a standard deviation of 0.3 year.

a.  Estimate the average profit per year UE earns from a customer.


b.  How could the approach of this problem be used to determine the optimal warranty period?