Acme Computer maintains a stock of spare parts for the entire country at one warehouse in Austin,

Question:

Acme Computer maintains a stock of spare parts for the entire country at one warehouse in Austin, Texas. To provide improved customer service, the company will expand the number of warehouses to ten, and they will be of equal size. The total inventory investment in the current warehouse is $5,000,000.
a. Using the square-root law, estimate the amount of inventory investment that the system is likely to contain with ten warehouses.
b. Suppose that nine warehouses are operating with $1,000,000 of inventory investment in each. If the company were to consolidate the inventory into three equal-size warehouses, how much inventory would be in each of them?
Distribution
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