Gce Model Questions Vol1 2017 Commerce Question 34

A firm stores three product categories A, B and C. Their annual demands are 12 000, 8 000 and 4 000 units respectively. The ordering cost per order is ₦500 for A, ₦400 for B and ₦300 for C. Holding costs are 0.25 % of the unit cost for A, 0.30 % for B and 0.35 % for C. Unit costs are ₦200 for A, ₦150 for B and ₦100 for C. Each unit occupies storage space: 0.05 m² for A, 0.04 m² for B and 0.06 m² for C. The warehouse provides a total usable storage space of 1 200 m². Using the Economic Order Quantity (EOQ) model for each product, determine the EOQ for A, B and C and compute the average inventory space required. If the total average space exceeds the warehouse limit, adjust the order quantity of the product that contributes the least to total annual inventory cost proportionally so that the space constraint is met. State the EOQs, whether the space constraint is satisfied, and any adjusted order quantity required.