Question: Amazon.com purchases small craft artifacts made by a supplier in India. Amazon.com sells 400,000 units of craft artifacts each month. Each unit costs $20, and

Amazon.com purchases small craft artifacts made by a supplier in India. Amazon.com sells 400,000 units of craft artifacts each month. Each unit costs $20, and the annual holding cost was 30 percent of the unit value. Placing a replenishment order incurs data-related costs of $500/order. The shipping company charges $6,000 as a fixed cost per shipment and a variable cost of $0.10 per unit shipped.

What is the optimal order size for Amazon.com? How many orders per year need to be placed at the optimum level? What is the cost structure of the optimal policy- annual fixed transportation cost? annual variable transportation cost? annual clerical cost? Annual carrying costs?

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