Answer the following questions using the information below:
Digital Goods is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Digital Goods at $10.00 per DVD; DVDs are shipped in packages of 25. Digital Goods pays all incoming freight, and DVD Mart does not inspect the DVDs due to Digital Goods' reputation for high quality. Annual demand is 208,000 DVDs at a rate of 4,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available:
-What is the economic order quantity?
Definitions:
Gross Profit
The difference between total revenue and the cost of goods sold, representing the profitability of a company's core activities before overhead.
Operating Expenses
The costs associated with the day-to-day operations of a business, excluding the cost of goods sold.
Current Asset
An asset that is expected to be converted into cash or used up within one year or within the business's normal operating cycle.
Normal Operating Cycle
The average time period between when a company purchases raw materials for production and when it receives cash from selling the finished goods.
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