Question

Stevens Clothing Company has four warehouses spread throughout the country. The company is considering building another warehouse, but needs to know what effect a new warehouse will have on inventory level requirements. Currently, the company has an average inventory level of 1,000 shirts at each warehouse. What average inventory level per warehouse is needed to maintain current standards if the new warehouse is built

Answer 1

Answer:

894 shirts

Explanation:

to calculate new average inventory levels we can use the following formula:

average inventory levels = [(√new number of warehouses / √current number of warehouses) x current inventory level] / new number of warehouses

= [(√5 / √4) x 4,000] / 5 = [(2.236 / 2) x 4,000] / 5 = (1.118 x 4,000) / 5 = 4,472.14 / 5 = 894.4 ≈ 894 shirts