Must use Excel for solution Zip Games purchases blank 3.5-inch disks onto which
ID: 403248 • Letter: M
Question
Must use Excel for solutionZip Games purchases blank 3.5-inch disks onto which it copies its software for sale through its mail order operation. A disk costs Zip $.20. Processing an order for more disks cost $15. Zip uses 60000 disks annually, and the company has a 25% cost of capital.
a. Find the optimal order quantity. b. How many orders are placed annually? c. How frequently will orders be placed? Must use Excel for solution
Zip Games purchases blank 3.5-inch disks onto which it copies its software for sale through its mail order operation. A disk costs Zip $.20. Processing an order for more disks cost $15. Zip uses 60000 disks annually, and the company has a 25% cost of capital.
a. Find the optimal order quantity. b. How many orders are placed annually? c. How frequently will orders be placed?
Explanation / Answer
1. optimal order quantity = sqrt (2*annual demand quantity*setup cost/holding cost) = sqrt(2*60000*15/.2*.25) 6000 2.number of orders = 60000/6000= 10 3. Order frequency = 6000/60000= 1/10
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