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: Relevant insurance, materials handling, breakage, etc., per year	$3.50

What is the economic order quantity?

A.

198 packages

B.

874 packages

C.

652 packages

D.

188 packages

E.

200 packages

2.

Costs incurred when preparing and issuing purchase orders are included in which of the following categories?

A.

carrying costs

B.

stockout costs

C.

stockin costs

D.

ordering costs

E.

purchasing costs

3.

Disc Company sells 400 discs per week. Purchase order lead time is 3 weeks and the economic order quantity is 900 units. What is the reorder point?

A.

950 units

B.

1,200 units

C.

3,500 units

D.

4,500 units

E.

5,600 units