Question: 3. Amazon has a demand for 12,000 PCs every month. Each PC costs $600 and Amazon has a holding cost of 25% (annual holding cost

3. Amazon has a demand for 12,000 PCs every month. Each PC costs $600 and Amazon has a holding cost of 25% (annual holding cost percentage) of the items value. The cost per order (fixed cost per order) is $3,000.

a. What is the EOQ for this product?

b. If Amazon uses the EOQ above as its order quantity then how many orders will it place per year for this item?

c. What is the cycle Inventory (average inventory) for the EOQ?

d. What flow time (in months) does this item have for the EQO you computed in part a?

e. Amazon would like the order size for this product to be 1000 units per order to facilitate shipping and handling. What would the fixed cost per order (currently $750) need to be to justify an EOQ of 1000?

f. Amazon uses a reorder point inventory control system for the PCs. Amazon orders these PCs from a supplier in Asia. The Asian supplier has a lead-time of 3 months. The standard deviation of monthly demand is 2,300 PCs. If Amazon wants to target a cycle service level of 90%, then what is the Reorder Point and Safety Inventory for these PCs?

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