Abstract
The purpose of this study is to determine an optimal inventory policy for imperfect quality production system. Empirical observations indicate that the process may deteriorate and produce defective or poor quality products. The article hypothesizes an imperfect production system where the products produced are a mixture of perfect and imperfect quality. The imperfect products are sold in the market by reducing selling price. The demand rate of perfect products and the demand rate of imperfect quality products are functions of the reduction of selling price for imperfect quality products. The mathematical expression for the expected profit function is derived and a solution procedure is proposed to determine the optimal policy
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