A model of group technology (GT) production systems including the cost of raw material processing is developed. It is assumed that the throughput time in a given GT cell depends linearly on the lot size. The optimal GT lot–size formula is derived and its properties discussed. The variability with respect to changes in the annual demand rate, the average carrying cost rate, and the rate charged per unit of cell production time are examined and evaluated. A typical case study is worked out to illustrate the analytical results.