Assessing Profitability of a Newsboy-Type Product with Normally Distributed Demand Based on Multiple Samples

Abstract

This article develops a new index Achievable Capacity Index, I-A, which can accurately measure the profitability of newsboy-type product with normally distributed demand. An unbiased and effective estimator of I-A is derived to estimate actual I-A as the parameters of distribution are unknown. Practically, the market information regarding demand is obtained from multiple samples rather than single sample. Therefore, we estimate and test I-A based on multiple samples. A hypothesis testing for examining whether the profitability meets designated requirement is presented. Critical values of the test are calculated to determine the evaluation results. Finally, a real case on the sales of donuts is presented to illustrate the applicability of our approach.