A University Orders All Office Supplies, Including Red Grading Pens

Multiple Choice

A university orders all office supplies, including red grading pens, out of a catalog from the same supplier. Conservative estimates of the demand for these red pens are 12,000 pens per year. There is a $25 charge for placing an order and the university has a $10 annual cost for holding these pens. Prices for the pens are based on the quantity purchased, so if less than 100 are ordered, the unit price is $2.50, if 100 to 299 are ordered, the unit price is $2.40, if 300 to 499 are ordered, the unit price is $2.30, and if 500 or more are ordered, the unit price is $2.20. What order quantity will result in the lowest total annual cost to the university?

A) 100
B) 245
C) 300
D) 500