Question

Babble, Inc., purchases blank cassette tapes for foreign language courseware. What are the ordering cost and holding cost for these tapes, and how can we calculate the Economic Order Quantity (EOQ)?

Answer 1

This response explains how to calculate the ordering cost, holding cost, and Economic Order Quantity (EOQ) for blank cassette tapes used in foreign language courseware.

Step-by-step explanation:

The ordering cost and holding cost for blank cassette tapes can be calculated using the Economic Order Quantity (EOQ) formula. The ordering cost refers to the cost associated with placing an order for the tapes, while the holding cost refers to the cost of storing and carrying inventory.

To calculate the ordering cost, you will need to know the cost of placing an order (including administrative costs) and the number of orders placed in a given period. The ordering cost can be calculated by multiplying the cost per order by the number of orders placed.

The holding cost is calculated by multiplying the cost to carry one unit of inventory (including storage, insurance, and obsolescence costs) by the average number of units held in inventory.

The Economic Order Quantity (EOQ) can then be calculated using the following formula: EOQ = sqrt((2 imes ordering cost imes annual demand) / holding cost).