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Dot Com - Optimal Order Quantity

At Dot Com, a large retailer of popular books, demand is constant at 32,000 books per year. The cost of placing an order to replenish stock is $10, and the annual cost of holding is $4 per book. Stock is received 5 working days after an order has been placed. No backordering is allowed. Assume 300 working days a year.

a)What is Dotcom optimal order quantity?
b) What is the optimal number of orders per year
c)what is the optimal interval ( in working days) between orders?
d) What is the demand during the lead time?
e) What is the reorder point?
f) What is the inventory position immediately after an order has been placed?

Solution Preview

a) What is Dotcom optimal order quantity?

Q* = √ 2DC0/[Ch]

Annual demand = D = 32,000 books per year
Ordering cost = C0 = $10
Carrying cost = Ch = $4 per book per year
Lead time = L = 5 ...

Solution Summary

This solution is comprised of a detailed explanation to find Dot Com optimal order quantity, optimal number of orders per year, optimal interval ( in working days) between orders, demand during the lead time, reorder point, and the inventory position immediately after an order has been placed.

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