Beta Products is planning to add another warehouse. Ten products from the entire line are to be stored in the new warehouse. These products will be the A and B items. All C items are to be served out of the plant. Forecasts of annual sales that are expected in the region of the new facility are 3 million cases (A, B, and C items). Historical data show that 30% of the items account for 70% of the sales. The first 20% of the entire line are designated as A items, the next 30% as B items, and the remaining 50% as C items. Inventory turnover ratios in the new warehouse are projected to be 9 for A items, and 5 for B items. Each inventory item, on the average, requires 1.5 cubic feet of space. Product is stacked 15 feet high in the warehouse.

1. What is the purpose of the ABC item classification.

2. What effective storage space is needed in square feet excluding aisle, office, and other space requirements.