PROBABILITY DISTRIBUTION IN RESEARCH SIMULATION
The simulation involved decisions related to (a) expenditures for the development of the data necessary to investigate the problem confronting the company. (b) testing to determine the causes of the increasing rejection rate by the testing laboratory, and (c) the purchase of machinery designed to correct the underlying causes of the problem confronting the company. The budget allocated for the development of the required data was $20,000. The budget for the acquisition of new machinery was $500,000.
The primary problem confronting the company was declining sales and market share in the Company's Mechanical Watch Division. Another trend that developed simultaneously with the decline in market share was a continuing increase in the rejection rate by the testing laboratory of the Company's submissions. The analytical problem focused on the probability that the testing rejection rate as a reason for the decline in market share could be validated through the application of probability distribution analysis.
The decision related to data developed included three sets of data. The data sets were as follows: (a) perception about chronometers, (b) response to advertising, and (c) mechanical watch industry data. Probability distribution analysis examines each of the seven tests performed by the testing laboratory using a sample size of 120 watches.
The probability distribution analysis identified three tests as the causes of the increasing rejection rates. The three tests were as follows: (a) horizontal and vertical difference, (b) maximum variation in rates, and (c) mean variation in rates.
An examination of the laboratory testing procedures lead to a decision to purchase three new machines. The new machines were as follows: (a) upgrade poising machine, (b) buy customized movement holders, and (c) upgrade timing machine. The decision was reached after determining that these...