Cleveland Times newspaper uses newsprint paper in its printing press for $200 per metric ton from its supplier. Cleveland Times estimated it uses 900 tons of paper annually. The annual carrying cost is $30 per ton and the ordering cost is $150 per order. The paper supplier is willing to offer a reduced price of $190 per ton if the order is at least 250 tons. Furthermore, if the newspaper is willing to order 600 tons or more, the price is further reduced to $180 per ton. It takes supplier 4 days to deliver an order, and the printing press operates 300 days per year.
1. How many tons of paper should be ordered to minimize the annual ordering, holding and purchase costs?
a) 95 tons
b) 250 tons
c) 600 tons
d) 900 tons
2. What is te minimum total annual ordering, holding and purchase costs?
a) $182,846
b) $175,725
c) $175,290
d) $171,225
3. What is the reorder point for the newsprint paper?
a) 12 tons
b) 15 tons
c) 18 tons
d) 21 tons