Abstract
This paper presents EMQ models in which some proportion of defective items are produced and some of them are converted to good items through rework process and items not converted are disposed. Numerical models are developed for three cases of disposal and optimal solution of each model is derived. In the first model, if a defective item is found during the production process, only re-workable items are stored and reworked after normal production is finished. Not re-workable items are disposed immediately during normal production. The second model deals with the case where all defective items are stored and items to be disposed are determined in rework process. In the third model, an additional inspection process exists before rework to determine rework or disposal. Numerical examples are presented to validate the proposed models.