Babble, Inc., buys 405 blank cassette tapes per month for use in producing foreign language courseware. The ordering cost is $11.75. Holding cost is $0.11 per cassette per year. a. How many tapes should Babble order at a time? Babble should order nothing 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 nothing months. (Enter your response rounded to one decimal place.)

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TomShelby TomShelby · Answer 1 · 2019-07-22T15:03:02+02:00

Answer:

(A) EOQ = 1019

(B) Time between Order = 2.5 months

Explanation:

Economic Order Quantity

This formula give us the quantity order with the fewer cost.

[tex]eoq = \sqrt{ \frac{2ds}{h} } [/tex]

Where

d = annual demand = 405 X 12 = 4860

s= supply cost or ordering cost = 11.75

h= holding cost= 0.11

[tex] \sqrt{ \frac{2 \times 4860 \times 11.75}{0.11} } = 1018.9566[/tex]

EOQ = 1019

Next, we need to know when to order:

[tex]eoq \div \frac{demand}{12 \: months} = time \: per \: order[/tex]

[tex]1019 \div \frac{4860}{12} = 2.516[/tex]

the ratio give us an idea of the consumption rate per month. we then divide the EOQ by this to know how many time between order we can have.