How much should the company be willing to pay

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Question: Tarbutton Lawn Distributors is a wholesale organization that supplies retail stores with lawn care and household products. One building is used to store FirstClass lawn mowers. The building is 50 feet wide by 40 feet deep by 8 feet high. Andrea Dormer, manager of the warehouse, estimates that only 90% of the warehouse can be used to store the FirstClass lawn mowers. The remaining 10% is used for walkways and a small office. Each FirstClass lawn mower comes in a box that is 5 feet by 4 feet by 2 feet high. The annual demand for these lawn mowers is 48,000, and the ordering cost for Tarbutton Lawn Distributors is $75 per order. It is estimated that it costs Tarbutton Lawn $45 per lawn mower per year for storage. Tar button Lawn Distributors is thinking about increasing the size of the warehouse. The company can do this only by making the warehouse deeper. At the present time, the warehouse is 40 feet deep. How many feet of depth should be added on to the warehouse if they wish to minimize the total annual costs? How much should the company be willing to pay for this addition? Remember that only 90% of the total space can be used to store First Class lawn mowers.

Reference no: EM131926754

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