As flexible manufacturing technology has become available across a broad range of applications, an increasingly large number of firms have confronted decisions about when to adopt the FMS technology and the size of FMS at that time. For small to medium size firms that should invest under budget limitation and high investment risk, proper size of FMS adoption at proper time is very important. In this paper the discrete optimal control theory has been used to make decisions about the size and timing of FMS capacity expansion over a planning period. Sensitivity analysis is presented for analysing the behavior of the model to variations of model parameters.