Prediction of warranty costs during a given period of time

This paper considers simple warranty policies where a one-time expense, possibly depending on the product’s age, is incurred at product failure. Interest focuses on the mean and variance of total warranty expense for a given future period. Product purchases are assumed to have a nonhomogeneous Poisson process, and so the actual number of products sold is not known at the time of the forecast. The special case is discussed where the distribution of product failure times is exponential, as is the case when average product failure time is unknown and must be estimated.