The demand for motorcycle tires imported by Dixie Import-Export is 32,000/year and may be assumed to be uniform throughout the year. The cost of ordering a shipment of tires is $500, and the cost of storing each tire for a year is $2. Determine how many tires should be in each shipment if the ordering and storage costs are to be minimized. (Assume that each shipment arrives just as the previous one has been sold.)
say you order n years worth of tires. storage costs for 1 year's worth is $64000. over the life of the order, you have to store anaverage of n/2 years worth per year. the total cost of the order is 500 + 32000n so the per year cost is 500/n + 32000 setting the derivative to 0, you get 500/n^2 32000 or n 8 order 8 years worth at a time (256000 tires)
