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What is the economic order quantity for govana ltd

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Reference no: EM132982949

Govana Ltd. is a distributor of headphones. Gaia Mart is a local retail outlet which sells headphones. Gaia Mart purchases headphones from Govana Ltd. at $29.00 per headphone set. Headphones are shipped in packages of 50. Govana Ltd. pays all incoming freight, and Gaia Mart does not inspect the headphones due to Govana's reputation for high quality. Annual demand is 320,000 headphones at a rate of 6500 headphones per week. Gaia Mart earns 13% on its cash investments. The purchase-order lead time is one week.

The following cost data are available:

Relevant ordering costs per purchase order $115.50
Carrying costs per package per year:
Relevant insurance, materials handling,
breakage, etc., per year $6.50

Problem 1: What is the economic order quantity?

a. 87.07 packages
b. 5.81 packages.
c. 63.26 packages
d. 62.49 packages.

Reference no: EM132982949

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