An inventory model of a volume flexible manufacturing syst in for a deteriorating item is developed, taking a stock-dependent demand rate. It is assumed that the demand rate remains stock-dependent for an initial period after which a uniform demand rate follows as the stock comes down to a certain level. The unit production cost is taken to be a function of the finite production rate which is treated to be a decision variable. The mathematical expression for the average profit function is derived and it is maximized subject to the different constraints of the system using Zoutendijk's method of constrained optimization, the algorithm of which is given. The solution procedure is illustrated with the help of a numerical example. Using the result of the example, sensitivity of the near optimal solution to changes in the values of the parameters of the system is analyzed.