Abstract:
In the present study, optimal pricing and optimal lot size production
policy models with price-sensitive demand of deteriorating products are
considered, taking into account two distinct production rates. It is
possible to begin production at one rate and then switch to a different
rate after a period of time. Such a scenario is appealing, in that a big
initial stock of produced goods can be avoided by starting production at
a modest pace, thus reducing the initial investment and the holding cost.
Further, the fifth-order equation is obtained when the equation for
optimal pricing is derived. Maximising the profit is calculated based on
a fifth-order equation. Both optimal pricing and production lot size are
decision variables, and optimal cycle time is also one of the decision
variables for determining price break-even points. As far as information
is concerned, no researcher has examined optimal pricing and
production lot size policies in two-rates-of-production models for their
study. The objective of the present study is to examine the optimal
production, optimal pricing, and optimal cycle time to reduce the total
cost and to maximise the total profit. Both price break-even point and
profit maximisation are considered. An appropriate mathematical model
is developed. An illustrative example is provided and numerically
validated using a sensitivity analysis. Microsoft Visual Basic 6.0 was used
to code the model’s outcome validation.
