Exercise Scenario: You are a Buyer/Planner. You plan 9,000,000 products per year and you earn $90,000 including benefits. Your orders are placed via EDI and the cost to place an order for each item is 1-cent/unit. A company in China makes the product in quantities of 30,000. The per-unit cost is comprised of $30.00 for raw material, $0.60 for packaging, $0.53 for labor, and $0.52 for factory overhead. After production, the product is stored in a factory warehouse in China for 30 days with an annual carrying cost of 21%. The product is shipped to the port in China via full truck load. The truck costs $230 and 30,000 items are on truck. The product is on the truck for 2 -days and the carrying cost is 22%. The product is then loaded onto a boat and shipped to the US port at a cost of 5 cents per unit. The product is stored in inventory on the boat for 45 days at an annual carrying cost of 23%. In the US, the product is then shipped to a RDC (Regional Distribution Center) via full truck load at a cost of 4 cents/unit. The terms are FOB Shipping Point which means ownership transfers to the RDC when it leaves the port. The product is stored in a RDC and shipped to stores over 20 days; the annual carrying cost to store product in the US is 30 -percent. 600 units are moved to a retail store in less than truck load quantities at the cost of 9 cents/unit. Ownership is transferred to the store as the inventory leaves the RDC, therefore the inventory is on the books of the store while in transit. Product is placed on shelf by the truck driver and sold at a gradual rate over 6 -day from the time it leaves the RDC at 30 -percent annual carrying cost. The cost of placing the product on the shelf is covered in the shipping cost. Total Landed Cost - Exercise Scenario Key Formulas Full Lot = Quantity Time Full Lot Per Unit Cost = (Value of Product x Annual Inventory Carrying Cost 96 Days in Inventory) /365 Gradual Depletion =( Quantity Time )/2 Gradual Depletion per Unit Cost = (Value of the Product Annual Inventory Carrying Cost % x Days in Inventory) / (365 x 2)