Economic Order Quantity for Items with Two Types of Imperfect Quality

The classical economic order quantity (EOQ) considers that the ordered items are of perfect quality. In this research, a model for the economic order quantity of imperfect quality items is developed, where the incoming lot has fractions of scrap and re-workable items. These fractions are considered to be random variables with known probability density functions. The demand is satisfied from perfect items and reworked items; whereas the scrap items are sold in a single batch at the end of the cycle with a salvage cost. A numerical analysis is provided to illustrate the sensitivity of the model to the fractions of scrap and reworked items.