| Summary: | This paper investigates the effect of inflation and time value of money on an economic production quantity (EPQ) model in the single product system while the shortage of inventory is not allowed and production of defective parts during the production process and also setup time for reworking have been considered that can be non-zero. Studies show that considering the production of defective parts and reworking, the effect of inflation rate and the time value of money in EPQ model leads to change the optimal Production batch size. Since cost function is complex and finding the optimal solution is not simple, so in this study the approximate values of close to the optimal which obtained by
Inventory-Total Cost chart, has been used of investigation of the effect of inflation and the time value of money on an economic quantity of production. Numerical calculations show that lack of attention to inflation and time value of money causes relatively high and unavoidably error in the cost.
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