Demand for a book at Amazon.com is 235 units per week. The product is supplied t

Question

Demand for a book at Amazon.com is 235 units per week. The product is supplied to the retailer from a factory. The factory pays $8 per unit, while the total cost of a shipment from the factory to the retailer when the shipment size is Q is given by Shipment cost = $65 + 2Q Assume the annual inventory carrying cost is 19 percent. What is the cost per shipment?

What is the annual holding cost per book? (Round your answer to 2 decimal places.)

What is the optimal shipment size? (Assuming 52 weeks per year. Round your answer to the nearest whole number.)

What is the average throughput time? (Round your answer to 3 decimal places.)

Explanation / Answer

Weekly demand = 235 For 52 weeks, Annual Demand (D) = 12220 From shipment cost 65 + 2Q, we see that fixed order cost is $ 65 per order and variable cost is $ 2 per unit Ordering Cost (O) = 65 Total cost per unit   (P) = 12 =fixed cost $ 10 + variable cost $ 2   Inventory carrying Rate (R ) = 19% Inventory carrying cost (C ) R*P = 2.28 per book Optimal Order Qty (Q) = (2*D*O/C)^.5 EOQ = 835 books Annual holding Cost per book = 2.28 Optimal Shipment Size = 835 Cost per shipment = 65 + 2Q = 1734.44

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