The Goodstone Tire Company produces a brand of tire called the Rain path. The annual demand at its distribution center is 12,400 tires per year. The transport and handling costs are $2600 each time a shipment of tires is ordered at the distribution center. The annual carrying cost is $3.75 per tire.
a. Determine the optimal order quantity and the minimum total annual cost.
b. The company is thinking about relocating its distribution center, which would reduce transport and handling costs to $1900 per order but increase carrying costs to $4.50 per tire per year. Should the company relocate based on inventory costs?