Outdoor Power Equipment worked example

Warranty Reserve at 4.6% expected claim rate: a worked example in outdoor power equipment

Push expected claim rate up to 4.6% and the picture changes. This example computes every intermediate figure at that operating point. a quality or finance team needs a defensible warranty reserve for a mower, trimmer, or generator program

The inputs for this scenario

  • Units under warranty: 5,000 units (unchanged)
  • Expected cost per claim: 85 $ / claim (unchanged)
  • Expected claim rate: 4.6 % (raised for this scenario; the documented default is 4)
  • Fixed warranty program cost: 2,500 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Expected claim cost = units under warranty × expected cost per claim × expected claim rate) to the inputs above produces each figure below.
  • At this operating point the engine returns 22,050 $ for total warranty reserve, the number this scenario is built around.
  • At this operating point the engine returns 4.41 $ / piece for warranty reserve per unit.
  • At this operating point the engine returns 19,550 $ for expected claim cost.
  • At this operating point the engine returns 2,500 $ for fixed warranty program cost.

How this compares with the baseline

  • Against the tool's baseline example, where expected claim rate sits at 4% and the headline result is 19,500 $, this scenario comes in 13.08% above the baseline at 22,050 $.
  • It computes the total warranty reserve as expected claim cost (units x cost per claim x claim rate) plus any fixed warranty program cost, and divides by units to give a per-unit reserve. The value of this scenario is the size of the gap it exposes: that gap, priced out over a year, is the budget you can justify spending to close it.

Results at a glance

  • Total warranty reserve: 22,050 $ (headline result)
  • Warranty reserve per unit: 4.41 $ / piece
  • Expected claim cost: 19,550 $
  • Fixed warranty program cost: 2,500 $

Run it with your numbers

  • Every input above is editable in the live Warranty Reserve calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.