AMD sells a popular processor (CPU) used by consumers wanting to upgrade their PCs for high-end gaming and creative work. The processors are produced by a contract manufacturer in Taiwan. AMD incurs a fixed cost of $4,700 for each order fulfilled and shipped by the contract manufacturer irrespective of the number of units ordered. The contract manufacturer charges $360 per unit ordered. The annual holding cost per unit is 22% of the procurement cost per unit. Orders take 8 days to arrive once placed. The demand for the units is steady and constant at 47,000 units per year. Assume that AMD operates 7 days per week, 52 weeks per year, and 364 days per year.

Rounding instructions.

• Carry calculations to three decimal places.
• Enter all answers rounded to one decimal place, e.g. nearest tenth of a unit, dollar, day, etc.

a) Compute the optimal order quantity: __ units.

Using the optimal order quantity,

b) Compute the optimal number of orders per year: ___orders per year.

c) Compute the optimal average time between orders: ___ days.

d) Compute the optimal total annual relevant cost: (inventory cost + ordering cost): $___

Suppose that the contract manufacturer requires AMD to order in batches of 900.

e) What lot size (order quantity) should AMD now use? AMD should order ___ units.

f) Enter the total annual cost (inventory + holding + procurement) for the lot size you prefer in Part e).

Optimal total annual cost = $____