Davis Steel Distributors is planning to set up an additional warehouse in its distribution network. Analysis of

Question:

Davis Steel Distributors is planning to set up an additional warehouse in its network. Analysis of item-sales data for its other warehouses shows that 25 percent of the items represent 75 percent of the sales volume. The company also has an inventory policy that varies with the items in the warehouse. That is, the first 20 percent of the items are the A items and are to be stocked with an of 8. The next 30 percent of the items, or B items, are to have a turnover ratio of 6. The remaining C items are to have a turnover ratio of 4. There are to be 20 products held at the warehouse with sales on the warehouse forecasted to be $2.6 million annually. What dollar value of average inventory would you estimate for the warehouse?
Inventory Turnover Ratio
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