Neco 2020 Commerce Question 6

Practice objective / multiple choice question 6 from the 2020 Neco Commerce examination.

Neco 2020 Commerce Objective / Multiple Choice Hard Difficulty
Question 6 NECO • 2020 • COMMERCE • objective

An item has an average daily demand of \(120\) units with a standard deviation of \(30\) units. Lead time is either \(5\) days (probability 0.8) or \(7\) days (probability 0.2). The company wants a 95\% service level (z = 1.645). The unit cost is \(\text{₦}500\), the ordering cost is \(\text{₦}15\,000\) and the holding cost is 25\% of the unit cost per year. Determine (i) the Economic Order Quantity (EOQ) and (ii) the reorder point (including safety stock).

Answer Options

Correct Answer A. EOQ \(\approx 3,243\) units; Reorder point \(\approx 843\) units
B. EOQ \\(\\approx 3,100\\) units; Reorder point \\(\\approx 800\\) units
C. EOQ \\(\\approx 3,500\\) units; Reorder point \\(\\approx 900\\) units
D. EOQ \\(\\approx 2,800\\) units; Reorder point \\(\\approx 720\\) units
Correct Answer
A
Correct Option:
EOQ \(\approx 3,243\) units; Reorder point \(\approx 843\) units

About This Question

This is Neco 2020 Commerce Question 6. It is one of the objective questions from the 2020 Neco Commerce examination.

Difficulty level: Hard .

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