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Question - Movie Time is a distributor of DVDs. Video Mart is a local retail outlet which sells blank and recorded DVDs. Video Mart purchases DVDs from Movie Time at $5.00 each; the units are shipped in packages of 25. Movie Time pays all incoming freight, and Video Mart does not inspect the DVDs due to Movie Time's reputation for high quality. Annual demand is 104,000 DVDs at a rate of 2,000 units per week. Video 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: $3.50
Relevant? insurance, materials handling, breakage, etc., per year
What is the economic order quantity?
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