The use of operational research techniques in the business world is not uncommon; however these techniques are scarcely used in the manufacturing industry or production environment. If such modern management methods are employed in production, considerable savings can be achieved besides removing the bottlenecks. The use of dynamic programming is discussed for solving the typical problems of the manufacturers. These problems are usually related to finding the optimal lot size for a production run and the frequency of production runs. The dynamic programming algorithm explained illustrates how the above questions can be answered.