Neco 2019 Commerce Question 25

Practice objective / multiple choice question 25 from the 2019 Neco Commerce examination.

Neco 2019 Commerce Objective / Multiple Choice Hard Difficulty
Question 25 NECO • 2019 • COMMERCE • objective

A retailer has an annual demand of 12,000 units for a product. Daily demand is constant and the standard deviation of daily demand is 5 units. Lead time is 10 days. The retailer desires a 95\% service level (z = 1.65). Holding cost is \(\text{₦}2\) per unit per year and ordering cost is \(\text{₦}500\) per order.\n(i) Compute the safety stock.\n(ii) Determine the reorder point (in units).\n(iii) Calculate the Economic Order Quantity (EOQ).\n(iv) Find the total annual inventory cost (ordering + holding).

Answer Options

A. Safety stock: 28 units; Reorder point: 355 units; EOQ: 2,460 units; Total annual cost: \\(\\text{₦}4,970\\)
B. Safety stock: 25 units; Reorder point: 350 units; EOQ: 2,500 units; Total annual cost: \\(\\text{₦}4,800\\)
C. Safety stock: 30 units; Reorder point: 360 units; EOQ: 2,400 units; Total annual cost: \\(\\text{₦}5,000\\)
Correct Answer D. Safety stock: 27 units; Reorder point: 356 units; EOQ: 2,450 units; Total annual cost: \(\text{₦}4,953\)
Correct Answer
D
Correct Option:
Safety stock: 27 units; Reorder point: 356 units; EOQ: 2,450 units; Total annual cost: \(\text{₦}4,953\)

About This Question

This is Neco 2019 Commerce Question 25. It is one of the objective questions from the 2019 Neco Commerce examination.

Difficulty level: Hard .

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