KLG is a textile manufacturer in Shanghai. They want to expand their t-shirt business into the United States. They have dedicated a factory in KLG to making the tshirts, and the production rate at that facility is 250 pallets of t-shirts per day. KLG's factory uses a just-in time production model so they store no safety stock at their manufacturing facility in Shanghai. The cost of space at the Shanghai facility is $30 per pallet per year. Each pallet has a value of $2000. KLG is opening a distribution center in Los Angeles from which they will serve the American demand for 250 pallets of t-shirts per day. They keep a safety stock of 1200 pallets of t-shirts at the distribution center. The cost of space at the LA facility is $40 per pallet per year. Each pallet has a value of $2200. KLG hires you as a logistics consultant to help them decide whether to transport the t-shirts from Shanghai to Los Angeles using sea or air. KLG uses a holding cost rate of 20%.

FlyHigh Airline has submitted a bid to KLG. They will guarantee a transport time of 3 days and will accept shipments up to 400 pallets in size. They will charge $1300 per shipment transportation costs and $500 per shipment material handling costs.

OceanMotion is a sea cargo line that has also submitted a bid to KLG. They guarantee a transport time of 18 days and will accept any size shipment. They charge a flat transportation and handling fee of $1000 per shipment. In the following questions, express your answer in terms of q only where necessary.

Calculate the annual pipeline inventory costs when air is the chosen mode. $ million

Calculate the annual holding cost when at the plant if shipment size is 400 pallets. $