Gce Model Questions Vol1 2025 Commerce Question 17
Practice objective / multiple choice question 17 from the 2025 Gce Model Questions Vol1 Commerce examination.
A retailer's average daily demand for product Y is 120 units with a standard deviation of 30 units. Lead time can be 5 days, but the retailer may reduce it to 3 days by paying an extra \(\text{₦}2{,}000\) for each day saved per order. Holding cost is 15% of the unit cost per year; the unit cost is \(\text{₦}500\). The retailer targets a 95% service level (z = 1.645) and incurs a stock‑out penalty of \(\text{₦}1{,}500\) for each stock‑out event. The retailer operates 250 working days per year. Should the retailer reduce the lead time, i.e., is the total annual cost (holding + stock‑out + lead‑time reduction) lower with a 3‑day lead time than with a 5‑day lead time?
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About This Question
This is Gce Model Questions Vol1 2025 Commerce Question 17. It is one of the objective questions from the 2025 Gce Model Questions Vol1 Commerce examination.
Difficulty level: Hard .
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