Question

A furniture manufacturer presently owns a total of four warehouses in the following cities Sacramento, Phoenix, Cincinnati, and Atlanta. The average inventory levels for the four warehouses are 8000 units, 10,000 units, 10,000 units, and 8000 units, respectively. They plan on moving all of their inventory to one warehouse in Memphis. Using the square root rule, what will be the required average inventory level at the new central Memphis warehouse required to maintain the system's present 98?

1) 9000
2) 18000
3) 20000
4) 24500

Answer 1

The required average inventory level at the new central Memphis warehouse, required to maintain the system's present 98%, would be approximately 16,370 units.

Step-by-step explanation:

The square root rule is used to determine the required average inventory level when combining multiple warehouses into a central one. According to the rule, the required average inventory level at the new central Memphis warehouse can be found by taking the square root of the sum of the squares of the average inventory levels of the individual warehouses.

In this case, the sum of the squares of the average inventory levels of the four warehouses is (8000^2) + (10,000^2) + (10,000^2) + (8000^2) = 268,000,000.

Taking the square root of this sum gives us approximately 16,370. Therefore, the required average inventory level at the new central Memphis warehouse, required to maintain the system's present 98%, would be approximately 16,370 units.