Gce Model Questions Vol1 2018 Commerce Question 7

A company's annual demand for a product is 12,000 units, assumed constant. The lead time for replenishment is 10 days. Demand during lead time follows a normal distribution with mean equal to the expected demand over the lead time and standard deviation equal to 5 % of that mean. The firm desires a 95 % service level (z‑value ≈ 1.645). The unit cost is ₦200, the holding cost is 20 % of unit cost per year, and the ordering cost is ₦1,500 per order. A stock‑out incurs a penalty of ₦500 per unit short. Determine (a) the economic order quantity (EOQ), (b) the reorder point including safety stock, and (c) the total annual cost (ordering + holding + stock‑out penalty). Express the total cost in naira to the nearest naira.