A theorem on the determination of economic order quantity under conditions of permissible delay in payments

Abstract

This article discusses the economic quantity under conditions of permissible delay in payments. First, this article shows that the total annual variable cost function is convex. Second, with convexity, a theorem is developed to determine the economic order quantity. The theorem also reveals that the economic order quantity under conditions of permissible delay in payments is generally higher than the economic order quantity given by the classical economic order quantity model. Numerical examples are given to illustrate the thorem.