Neco Model Questions Vol1 2018 Commerce Question 21

Practice objective / multiple choice question 21 from the 2018 Neco Model Questions Vol1 Commerce examination.

Neco Model Questions Vol1 2018 Commerce Objective / Multiple Choice Hard Difficulty
Question 21 NECO_MODEL_QUESTIONS_VOL1 • 2018 • COMMERCE • objective

A retailer faces an annual demand of \(12\,000\) units for a product. Each order incurs a fixed ordering cost of \(\text{₦}500\). The holding cost is \(20\%\) of the unit cost per year. The supplier offers two price tiers: if the order quantity is at least \(800\) units the unit cost is \(\text{₦}150\); otherwise the unit cost is \(\text{₦}180\). Determine the order quantity that minimises the total annual cost (ordering + holding + purchase) and state that minimum total cost.

Answer Options

A. Order quantity = 750 units; Minimum total annual cost = ₦1,845,000
B. Order quantity = 800 units; Minimum total annual cost = ₦1,850,000
C. Order quantity = 900 units; Minimum total annual cost = ₦1,795,200
Correct Answer D. Order quantity = 800 units; Minimum total annual cost = ₦1,819,500
Correct Answer
D
Correct Option:
Order quantity = 800 units; Minimum total annual cost = ₦1,819,500

About This Question

This is Neco Model Questions Vol1 2018 Commerce Question 21. It is one of the objective questions from the 2018 Neco Model Questions Vol1 Commerce examination.

Difficulty level: Hard .

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