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Problem 1: Pieter Pty Ltd is a distributor of DVDs. Dhruv Mart is a local retail outlet which sells blank and recorded DVDs. Dhruv Mart purchases tapes from Pieter at $12.00 per DVD; DVDs are shipped in packages of 70. Pieter pays all incoming freight, and Dhruv Mart does not inspect the DVDs due to Pieter's reputation for high quality. Annual demand is 350,000 DVDs at a rate of 5,000 DVDs per week. Dhruv Mart earns 10% on its cash investments. The purchase-order lead time is one week. The following cost data are available: Relevant ordering costs per purchase order $120.20 Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year $ 3.50 What is the economic order quantity?
a. 506 packages
b. 587 packages
c. None of the answers
d. 83 packages
e. 118 packages
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