The Summer Outdoor Furniture Company produces wooden lawn chairs. The annual demand from its store customers is 17,400 chairs per year. The transport and handling costs are $2,600 each time a shipment of chairs is delivered to stores from its warehouse. The annual carrying cost is $3.75 per chair.
a. Determine the optimal order quantity and minimum total annual cost.
b. The company is thinking about relocating its warehouse closer to its customers, which would reduce transport and handling costs to $1,900 per order but increase carrying costs to $4.50 per chair per year. Should the company relocate based on inventory costs?