A deterministic inventory model is developed by assuming that the demand rate is stock-dependent and the items deteriorate at a constant rate θ. The expression for the average net profit ; over one production run is derived and its optimization with respect to the decision variables Q (initial stock) and T (duration of a production cycle) is carried out. This leads to two highly nonlinear equations which are solved by using a subroutine NEQNF in IMSL (MATH Library) in CYBER 180 480A computer system. The optimal solution so derived is compared with that for the no-deterioration (θ=0) case. Sensitivity of the optimal solution to changes in parameter values is examined. Several aspects of the functional form for the demand rate are considered in a separate section. Finally, the salient features of the problem and its solution are discussed in brief.
