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In this paper, we consider the effect of rework of defective items on the economic batch quantity (EBQ). In the classical EBQ model, it is assumed that the products produced during each cycle are all non-defective. However in practice, there are many situations in which a certain amount of defective products are produced during each cycle. In this paper, we assume that in each production cycle when the normal production ends the rework of defective items starts immediately after a non-zero set up time for the rework process. In deriving the mathematical model, other than the costs considered in the classical EBQ, we consider the inspection cost, rework and holding costs of defective items, set up cost for rework, and the cost of waiting time of defective items for rework. Then, we obtain the optimal batch quantity which minimizes the sum of the above costs.