Abstract
The paper defines a total cost of the production and inventory under the consideration of "time value of money" and then analyzes the economic production order quantity (called a true EPQ) which minimizes the total cost. Although it can be shown that the true EPQ is uniquely determined, an algebraic computation of finding the true EPQ is difficult. The classical EPQ which has been discussed in the traditional inventory theory is introduced for a comparison with the true EPQ. The paper shows that an inequality relationship between the true EPQ and the classical EPQ depends on some parameters of a given inventory model by using a discriminative function.
