Find total annual cost of paper for webster at optimal level

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Reference no: EM131308130

The Webster Times buys 10,000 tons of newsprint annually with the following pricing structure: 1 to 99 tons $100 a ton, 100 to 300 tons $95 a ton, over 300 tons $90 a ton. The cost of capital to Webster is 14%. It stores the paper in a climate controlled warehouse where the cost of air conditioning is proportional to the amount of paper stored at a given time, and averages $600 per ton per year. The cost of placing an order is $50. Find:

(A) The optimal amount of newsprint that Webster should order at a time.

(B) Total annual cost of paper for Webster at the optimal level.

Please show all work

Reference no: EM131308130

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