Estimating and testing achievable capacity index with exponentially distributed demand

Rung Hung Su*, Dong Yuh Yang, W.l. Pearn

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Achievable Capacity Index proposed by Su and Pearn [12-13] is a new evaluation tool, which can accurately measure the profitability of newsboy-type product with normally distributed demand. However, in practical situations, the demand variable is non-normal distributed. In this paper, we attempt to investigate a probable case that the demand is exponentially distributed. The corresponding index denoted by IE is developed and the statistical properties of its estimator are derived. Based on this index, we implement a hypothesis testing for examining whether the profitability reaches a specified level. The critical values of the test are tabulated for some commonly used profitability requirements. We also carry out the sample size determination by means of designated Type I error and Type II error. Finally, a real example taken from a retail store in Taiwan is presented to illustrate the applicability of our approach.

Original languageEnglish
Pages (from-to)221-232
Number of pages12
JournalQuality Technology and Quantitative Management
Issue number2
StatePublished - 1 Jan 2015


  • Achievable capacity index
  • Exponential
  • Hypothesis testing
  • Newsboy problem
  • Sample size determination

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