Question

​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.)

Answer 1

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.

$eoq = \sqrt{ \frac{2ds}{h} }$

Where

d = annual demand = 405 X 12 = 4860

s= supply cost or ordering cost = 11.75

h= holding cost= 0.11

$\sqrt{ \frac{2 \times 4860 \times 11.75}{0.11} } = 1018.9566$

EOQ = 1019

Next, we need to know when to order:

$eoq \div \frac{demand}{12 \: months} = time \: per \: order$

$1019 \div \frac{4860}{12} = 2.516$

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.