Question

Amazon, one of the top retail companies in the United States, initiated its own delivery network to save 13% on order delivery costs, spending $8 billion annually on last-mile delivery. With a return on sales of 23%, what is the equivalent yearly increase in sales earned by developing its own delivery network? (Round to the nearest unit.)

A) $1.8 billion
B) $1.04 billion
C) $2.04 billion
D) $1.6 billion

Answer 1

The equivalent yearly increase in sales earned by Amazon for initializing its own delivery network, based on a 23% return on sales, is approximately $4.5 billion. This result is not reflected in the provided answer options, indicating a possible error.

Step-by-step explanation:

Amazon's initiative to create its own delivery network saved the company 13% on order delivery costs, which equates to a savings of $1.04 billion annually ($8 billion multiplied by 0.13). To find the equivalent yearly increase in sales earned by this cost saving, we can apply Amazon's return on sales (23%).

By using the equation equivalent increase in sales = savings / return on sales rate, we find that the equivalent increase in sales is $1.04 billion / 0.23, which is approximately $4.52 billion. When rounded to the nearest unit, this increase in sales is $4.5 billion, not one of the options provided in the question, suggesting there might be a mistake either in the provided options or the interpretation of the question.