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A convenient way of determining optimal order quantity is the popular"basic EOQ model". To be able to use the basic EOQ model, several conditionsshould be satisfied. Numerous research efforts have been undertaken to extendthe EOQ model to conform more closely with real world situations.Among them is to determine the optimal inventory replenishment policyfor deteriorating items, allowing shortages, and the demand rate isdeterministic and time-varying. This study will be proposed thedeteriorating inventory model with the continuous time-varying demandand shortages during the finite planning horizon, and determine the optimalorder intervals and the optimal number of replenishments. Moreover,we consider the effects of price policy and time value of money onthe inventory model. Numerical examples are given to explain the solutionalgorithms. Sensitivity analysis is performed to study the effects ofchanges in the system parameters on the optimal cost (net profit),the number of replenishments, and the order intervals.
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