Zip games purchases blank dvd disks onto which it copies its software for sale through its mail
order operation. a disk costs zip $.25. processing an order for more disks cost $16. zip uses 62,000
disks annually, and the company has a 24% cost of capital.
a. find the optimal order quantity.
b. how many orders are placed annually?
c. how frequently will orders be placed?

a. 575 units

b. 107.83 orders

c.  3.38 days

Explanation:

a. The computation of the economic order quantity is shown below:

=

where,

Annual demand = 62,000 disk

Ordering cost = $16

Carrying cost = $0.25 × 24% = $6

Now put these values to the above formula  

So, the value would equal to

=

= 575 units

b. The number of orders would be equal to

= Annual demand ÷ economic order quantity

= 62,000 ÷ 575 units

= 107.83 orders

c. The frequently order would be

= Total number of days in a year ÷ number of orders in a year

= 365 days ÷ 107.83 orders

= 3.38 days