Neco 2017 Commerce Question 13

Practice objective / multiple choice question 13 from the 2017 Neco Commerce examination.

Neco 2017 Commerce Objective / Multiple Choice Hard Difficulty
Question 13 NECO • 2017 • COMMERCE • objective

A retailer faces an annual demand of 12,000 units for a product. The ordering cost is \(\N5,000\) per order and the holding cost is 20\% of the unit cost per year. The supplier offers the following price breaks: up to 1,000 units per order - unit cost \(\N150\); 1,001 to 3,000 units - unit cost \(\N140\); more than 3,000 units - unit cost \(\N130\). Determine the order quantity that minimises the total annual cost (purchase + ordering + holding) and state the minimum total cost.

Answer Options

Correct Answer A. Optimal order quantity = 3,001 units; Minimum total cost = \N1,619,006
B. Optimal order quantity = 1,000 units; Minimum total cost = \N1,700,000
C. Optimal order quantity = 2,500 units; Minimum total cost = \N1,650,000
D. Optimal order quantity = 3,500 units; Minimum total cost = \N1,610,000
Correct Answer
A
Correct Option:
Optimal order quantity = 3,001 units; Minimum total cost = \N1,619,006

About This Question

This is Neco 2017 Commerce Question 13. It is one of the objective questions from the 2017 Neco Commerce examination.

Difficulty level: Hard .

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