A(r) = pi r^2 + ((26 - 2 pi r) / 4)^2
A(r) = pi r^2 + ((13 - pi r) / 2)^2
A(r) = pi r^2 + (169 - 26 pi r + pi^2 r^2) / 4
A(r) = pi r^2 + 169/4 - 13/2 pi r + 1/4 pi^2 r^2
A'(r) = 2 pi r - 13/2 pi + 1/2 pi^2 r
A'(r) = 0
2 pi r - 13/2 pi + 1/2 pi^2 r = 0
(2 pi + 1/2 pi^2) r = 13/2 pi
r = ((13/2) pi) / ((2 + 1/2 pi) pi)
r = (13/2) / (2 + 1/2 pi)
r = 13 / (4 + pi)
2 pi r = 2 pi (13 / (4 + pi))
2 pi r = 26 pi / (pi + 4)
2 pi r = 11.4374 cm
So the area is a minimum when the circumference of the circle is about 11.4374 cm.
You can (to a reasonable extent) verify this by calculating the area when the circumference is 11.4 cm, 11.4374 cm, and 11.48 cm.
When c = 11.4 cm, r = 11.4 cm / 2pi = 1.8144 cm
When c = 11.4374 cm, r = 11.4374cm / 2pi = 1.8203 cm
When c = 11.48 cm, r = 11.48cm / 2pi = 1.8271 cm
A(r) = pi r^2 + ((26 - 2 pi r) / 4)^2
A(1.8144) = 23.664386 cm^2
A(1.8203) = 23.664189 cm^2
A((1.8271) = 23.664447 cm^2
Looks good! A(1.8203), which is the area associated with a circumference of 11.4374cm, is the smallest.