Abstract
For a product sold with a warranty period T, the manufacturer must pay all repair costs for failures in [O, T]. This paper presents a model to estimate warranty liability associated with this type of warranty policy. The quantities estimated are: (i) the expected total warranty cost and prediction interval for a fixed lot size of sales, and (ii) the expected number of units returned for repair and the expected warranty costs incurred in any time interval during the product life cycle, when sales occur continuously. The results are applicable for any failure time distribution and for various types of repair. A numerical example is given to illustrate the application of the model.
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