Neco 2024 Commerce Question 3

Practice objective / multiple choice question 3 from the 2024 Neco Commerce examination.

Neco 2024 Commerce Objective / Multiple Choice Hard Difficulty
Question 3 NECO • 2024 • COMMERCE • objective

A warehouse handles a single product with an annual demand of \(12,000\) units. The ordering cost is \(\text{₦}8,000\) per order and the unit cost is \(\text{₦}500\). Holding cost equals \(25\%\) of the unit cost per year. The warehouse can store at most \(1,200\) units at any time, and the company wishes to keep safety stock equal to \(10\%\) of the order quantity. Determine the optimal order quantity that satisfies the storage constraint and compute the total annual cost (including purchase, ordering and holding costs).

Answer Options

A. Optimal order quantity = 1,050 units; Total annual cost = ₦6,180,500
B. Optimal order quantity = 950 units; Total annual cost = ₦6,100,000
Correct Answer C. Optimal order quantity = 1,090 units; Total annual cost = ₦6,169,823
D. Optimal order quantity = 1,200 units; Total annual cost = ₦6,250,000
Correct Answer
C
Correct Option:
Optimal order quantity = 1,090 units; Total annual cost = ₦6,169,823

About This Question

This is Neco 2024 Commerce Question 3. It is one of the objective questions from the 2024 Neco Commerce examination.

Difficulty level: Hard .

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