BADM 220 Business Statistics Minitab Project 2 Quality Electronics Quality Electronics, Inc. (QE) sells high-end electronic game consoles, competing with the Sony Playstation, Nintendo Wii, and the Microsoft Xbox lines. Management learned that the preholiday season is the best time to introduce a new game console, because many families use this time to look for new ideas for December holiday gifts. When QE discovers a new console with good market potential it chooses an October market entry date getting a jump on competitors who often wait until November to introduce their new models. In order to get toys in its stores by October, QE places one time orders with its Chinese manufacturers in June or July of each year. Demand for electronic game consoles can be highly volatile. If developers like the features of a new console, many games will be developed for it. In addition, if a new consoles catches on, a sense of shortage in the market place often increases the demand to high levels and large profits can be realized. However, new consoles can also flop, with few games written for it, leaving QE stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new game console should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. For the coming season, QE plans to introduce a new console called the ZFactor 5000. In addition, to a state of the art hand-held controller, this computer game console features a virtual reality helmet with built-in microphone and voice-controlled voice-over Internet cell phone features to enhance game play experience and communication with other players. It also features a 'hired gun' option that connects the player to a group of 'for hire' game players (in southeast Asia) that will complete a given level in a game or rapidly level up a game character for you, allowing the game character to acquire more advanced skills, abilities and equipment, and thereby allowing players to skip the easy beginning levels and take on the more challenging levels for a minimal charge. As usual, QE faces the decision of how many ZFactor 5000 console units to order for the coming holiday season. Members of the management team suggested order quantities of 160,000, 175,000, 220,000, or 250,000 units. The wide range of order quantities suggested indicate considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential and to help make an order quantity recommendation. QE expects to sell the ZFactor 5000 for $240 based on a cost of $160 per unit. If console inventory remains after the holiday season, QE will sell all surplus inventory for $25 per unit. After reviewing the sales history of similar products, QE's senior sales forecaster predicted an expected demand of 200,000 units with a 0.90 probability that demand would be between 120,000 units and 280,000 units. The senior sales forecaster did not provide the standard deviation but indicated it could be computed from this information with the following hint: The Z score associated with a 90 percent interval such as this is 1.645. Assignment: Prepare a managerial report that addresses the following issues and recommends an order quantity for the ZFactor 5000 game console. The target audience for this report is your boss, a senior manager who has a basic understanding of business statistics. Of course, if the report is exemplary you may expect it to be circulated more widely in the company to your credit. 1) Use the senior sales forecaster's prediction to define a normal probability distribution that can be used to approximate the demand distribution. In particular, state the mean and standard deviation for a normal distribution based on the information provided by the senior sales forecaster. 2) Use Minitab to create a graph of the distribution and show its mean and standard deviation. To make a graph, follow these steps: a. use a column in the worksheet for the random variable. Call it 'X'. b. use a column in the worksheet for the function value. Call it 'f(x)'. c. use calc/make patterned data/simple set of numbers, store data in x, values from 100,000 to 300,000 in steps of 10,000, list the sequence once. d. use calc/probability distributions/Normal; use probability density and the mean and standard deviation you have determined in part 1, input column X, optional storage f(x). e. Make a scatterplot with connect line using X = X and Y = f(x). Give it an appropriate title, x-axis label, and put your name in the footer. 3) Use Minitab to compute the probability of a stock-out for the order quantities suggested by the members of the management team. Include a table in your document that summarizes the results of your computations. 4) Using Excel, compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 125,000 units, most likely case in which sales = 200,000 units and best case in which sales = 275,000 units. Calculate an overall expected profit for each of the four order quantities if it is assumed the worst case and best case each have a 5% chance of occurring, respectively. Include a table in your document that summarizes the results of your computations. 5) Use Minitab to address this issue. One of QE's managers felt that the profit potential was so great that the order quantity should have a 75% chance of meeting demand and only a 25% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 6) Provide your own personal recommendation for an order quantity and note the associated profit projections. Explain all of the reasons for your recommendation. You are welcome to include in your explanation any additional analysis that you performed in support of your recommendation. Additional Instructions 1) Use Minitab software to generate the graphics and statistics used in your analysis. Use Excel only to format the tables used in your analysis for inclusion in your Word report. Exception: The Expected Profit Tables in Questions 4 and 5 above may be generated solely in Excel. See the sample Excel document included with this assignment in the Dropbox. 2) Prepare a report using headings that reflect your analysis. Begin with a brief description of the problem in your own words. Include the formula to compute the standard deviation in your report. Be sure to answer each question fully and completely. Conclude your report by clearly stating your personal recommendation. Your report must be submitted as a single document using an appropriate cover sheet, one-inch margins, with pages numbered consecutively at the bottom (the cover sheet should not be numbered), and consistent font sizes. You should copy-and-paste all Minitab output and Excel tables that are relevant to your analysis from Minitab and Excel into your document and format appropriately. Use a common word processor document format even if you are not using a common word processor program: PDF (.pdf) or Word (.doc or docx) format is preferred; Rich Text Format (.rtf) is acceptable. 3) Your comments and observations will be considered equally as important as your proper use of the statistical software. 20 points will be based on your Minitab output, 25 points on your analysis, and the remaining 5 points based on organization, presentation, and formatting. Any project submitted after the due date and time will be assessed a 5 point penalty if submitted within 24 hours after the due date. An additional 5 points will be deducted for each subsequent 24 hour day that passes until submission. 4) Your work should be submitted using the course D2L site's Dropbox page. E-mailing me a file is not acceptable unless done so at the instructor's request or you have received the instructor's permission in advance. Due: Wednesday, June 8, by 11:59 pm