Demand for a book at Amazon.com is 325 units per week. The product is supplied t

Question

Demand for a book at Amazon.com is 325 units per week. The product is supplied to Amazon from a factory. The factory charges Amazon $10 per book, while the total cost of shipping an order from the factory to the Amazon, when the shipment sze is Q, is given by Shipment cost- $75+20 Assume the annual inventory carying c cost is 26 percent 1.What is Amazon's total coat per shipment? shipment a-2. What is the annual holding cost per book? (Round your answer to 2 decimal places.) Annual holding per book cost b. What is the opimal shipment size? (Assuming $2 weeks per year. Round your answer to the nearest whole number.) Optimal books c. What is the averago throughput time? (Do not round intormediate calculations. Round your answor to 3 decimal placos.) Average hroughputmonths time

Explanation / Answer

A-1)Total variable cost is $10+$2 = $12

So total cost per shipment = $75+12Q

a-2) annual holding cost per book =12*20%= $2.40/book

b) Optimal shipment size

Annual demand= 325*50 =16250 (assuming 50 weeks per year)

EOQ = SQUARE ROOT [{2*16250*75}/2.4]

=1007.78 or 1000 books

c) Average throughput time

Number of orders=16250/1007.78=16.12

Time between orders= 12/16.12= 0.744

The average time a unit stays in the system is half of it which is 0.372 month

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