In 20X1, WHCL introduced a new model of gas furnace that is popular with consumers because...

 

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In 20X1, WHCL introduced a new model of gas furnace that is popular with consumers because its reduced gas consumption results in lower heating bills. The furnace design has remained virtually unchanged since it was introduced. The furnaces are sold with 10year warranties on parts and labour. Historically, claims have been minimal. In the summer of 20X7, several warranty claims were made against WHCL. Routine inspections by gas company employees revealed cracked heat exchangers, which could leak gases that might cause health problems when mixed with warm air inside the house. Thirty claims were made, and WHCL paid for repairs. The cost of repairing each furnace was $150, which was expensed by WHCL. Jacob Kovacs believes that the furnaces were damaged because of poor installation by contractors. He cannot see more than an additional 40 or 50 units being damaged. The 30 repaired furnaces were manufactured in 20X5 and 20X6. Over 10,000 units of this model have been sold over the past seven years. Later, in a discussion with the chief engineer, you learn that she had examined the heat exchanger used in the gasfurnace model in question and saw no evidence of a design flaw. However, she expressed concern that the problem might be due to heavy use of the furnace. She noted that the 30 reported problems were in northern locations where the demands on the equipment are considerable. Between 1,500 and 2,000 furnaces were installed in houses in those locations. In 20X1, WHCL introduced a new model of gas furnace that is popular with consumers because its reduced gas consumption results in lower heating bills. The furnace design has remained virtually unchanged since it was introduced. The furnaces are sold with 10year warranties on parts and labour. Historically, claims have been minimal. In the summer of 20X7, several warranty claims were made against WHCL. Routine inspections by gas company employees revealed cracked heat exchangers, which could leak gases that might cause health problems when mixed with warm air inside the house. Thirty claims were made, and WHCL paid for repairs. The cost of repairing each furnace was $150, which was expensed by WHCL. Jacob Kovacs believes that the furnaces were damaged because of poor installation by contractors. He cannot see more than an additional 40 or 50 units being damaged. The 30 repaired furnaces were manufactured in 20X5 and 20X6. Over 10,000 units of this model have been sold over the past seven years. Later, in a discussion with the chief engineer, you learn that she had examined the heat exchanger used in the gasfurnace model in question and saw no evidence of a design flaw. However, she expressed concern that the problem might be due to heavy use of the furnace. She noted that the 30 reported problems were in northern locations where the demands on the equipment are considerable. Between 1,500 and 2,000 furnaces were installed in houses in those locations.

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New Furnaces from General Heating use up to 40 less natural gas than older models Natural gas prices have more than tripled in the past 10 years and many analysts are forecasting further price increas... View the full answer