Answer:
The full question is "Currently, a company has 59,000 units of safety stock for a product located in 9 warehouses. The company is contemplating expanding to 28 warehouses. The company believes that this increased safety stock inventory investment with the new locations will result in an additional $950,000 in revenue due to improved customer service. Assuming that each unit in safety stock inventory costs $4, is the expansion to 28 warehouses a potentially good idea? The proposed plan Y sense for the company because the change in total profit is $. Enter your response rounded to the nearest dollar and include a minus sign if appropriate.)"
Current Total safety stock = 59,000
No. of warehouses = 9
Safety stock per warehouse = 59,000/9 = $6,555.56
New number of warehouses = 28
Increase in number of warehouses = 28 - 9 = 19
Increase in number of safety stock = 19 * 6,555.56 = 124,555.64
Cost of each unit of safety stock = $4
Cost of increased safety stock = $4 * 124,555.54
Cost of increased safety stock = $498,222.56
Additional revenue = $950,000
Since, additional revenue > additional cost of safety stock, the additional warehouses is a good idea.
Increase in profit = Additional revenue - Increased cost
Increase in profit = $950,000 - $498,222.56
Increase in profit = $451,777.54
Hence, The proposed plan makes sense for the company because the change in total profit is $451,777.54