Abstract

This study presents an economic production quantity model for deteriorating items in which backorder is allowed. The selling price of backorder depends on the customers that are willing to purchase the items under the condition that they receive their orders after a certain fraction of waiting time. The utilization of facility is an important index of production efficiency in the opportunity cost perspectives. This model considers both the impact of discounted selling price of backorder and the utilization rate of facility during the production process. Numerical examples and sensitivity analysis are given to illustrate the model.

Key words: Deterioration, linearly discounted backordering, utilization of facility, opportunity cost.