Question

Babble, Inc., buys 400 blank cassette tapes per month for use in producing foreign language courseware. The ordering cost is $12.50. Holding cost is $0.12 per cassetto per year. a. How many tapes should Babble order at a time? Babble should order 1000 tapes at a time. (Enter your response rounded to the nearest whole number) b. What is the time between orders? The time between orders is 0.208 months. (Enter your response rounded to one decimal place)

Answer 1

Solution:

D = 400*12 = 4800 units
S = $12.5
H = $0.12

a: We order EOQ.

$\small EOQ = \sqrt{\frac{2DS}{H}} = \sqrt{\frac{2*4800*12.5}{0.12}} = 1000\ units.$

b: Time between orders.

$\small Time\ Between\ orders = \frac{EOQ}{D}*12 = \frac{1000}{4800}*12 = 2.5\ months$