Walmart sells 2000 units of home goods each month. Each unit cost $40 and Walmart has an annual holding cost if 25 percent. Placing a replenishment order incurs clerical cost of $300/order.
Assume that the shipping company charges $900 as fixed cost per shipment
a) What is the optimal order size?
b) What is the annual total cost of the optimal policy (annual clerical Cost+ annual transportation cost+annual holding cost)?
Assume that the shipping company charges a variable cost of $0.10 per unit shipped
c) What is the order size?
d) What is the annual total cost of the optimal policy (annual clerical cost+ annual transportation costs annual holding cost)?