Question

Babble, Inc., buys 425 blank cassette tapes per month for use in producing foreign language courseware. The ordering cost is $18.50. Holding cost is $0.10 per cassette per year.

How many tapes should Babble order at a time?
Babble should order____tapes at a time. (Enter your response rounded to the nearest whole number.)

Answer 1

Babble, Inc. should order approximately 1,372 blank cassette tapes at a time.

Step-by-step explanation:

In order to determine the number of tapes Babble, Inc. should order at a time, we need to consider the economic order quantity (EOQ) model which minimizes the total ordering and holding costs. The EOQ formula is:

EOQ = √[(2 × Annual Demand × Ordering Cost) ÷ Holding Cost per Unit]

Given that Babble, Inc. buys 425 blank cassette tapes per month, the annual demand would be 425 tapes/month × 12 months = 5,100 tapes. The ordering cost is $18.50, and the holding cost is $0.10 per cassette per year. Plugging these values into the EOQ formula:

EOQ = √[(2 × 5,100 × 18.50) ÷ 0.10] = √[188,100 ÷ 0.10] ≈ √1,881,000 ≈ 1,372 tapes

Therefore, Babble, Inc. should order approximately 1,372 tapes at a time.