Optimal Target Settings – Mini Paper Appearing in Summer 1985 Newsletter

Abstract: In the food industry, a product must be sold at a discount when its content, e.g., weight or volume, is below a standard. This mini paper gives a formula for the optimal target setting for a process assuming that the distribution of product content is normal with and adjustable mean representing the target value and a fixed (for all settings of the mean) standard deviation. This optimal target setting will result in maximizing profits. Lastly, a brief example showing the increase in profits at the optimal setting compared to several other possible settings is presented.

Keywords: Mean - Standard deviation - Optimization