Digital Goods is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Digital Goods at $10.00 per DVD; DVDs are shipped in packages of 25. Digital Goods pays all incoming freight, and DVD Mart does not inspect the DVDs due to Digital Goods' reputation for high quality. Annual demand is 208,000 DVDs at a rate of 4,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available: Relevant ordering costs per purchase order $94.50
Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year $ 3.50
What is the economic order quantity? A) 384 packages B) 475 packages C) 146 packages D) 196 package
Need help with this example.
EOQ = The square root of [(2 Ã (208,000/25) Ã $94.50) / ($37.50+ $3.50) How do I get the 37.50? I don't know where this number came from.
EOQ = 196 package

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