Neco Model Questions Vol1 2020 Commerce Question 28

Practice objective / multiple choice question 28 from the 2020 Neco Model Questions Vol1 Commerce examination.

Neco Model Questions Vol1 2020 Commerce Objective / Multiple Choice Hard Difficulty
Question 28 NECO_MODEL_QUESTIONS_VOL1 • 2020 • COMMERCE • objective

A retailer has an annual demand of 12,000 units for a product. The ordering cost is \(\text{₦}2,500\) per order. The holding cost equals \(25\%\) of the unit cost per year. The unit cost is \(\text{₦}800\) for orders of fewer than 1,200 units, and \(\text{₦}750\) for orders of 1,200 units or more. The warehouse can hold at most 1,500 units at any time. Determine the order quantity that minimizes the total annual cost while respecting the capacity limit, and state the resulting total annual cost (in Naira).

Answer Options

A. Order 1,000 units; total annual cost = \text{₦}9,250,000
B. Order 1,200 units; total annual cost = \text{₦}9,200,000
C. Order 1,500 units; total annual cost = \text{₦}9,300,000
Correct Answer D. Order 1,200 units; total annual cost = \text{₦}9,137,500
Correct Answer
D
Correct Option:
Order 1,200 units; total annual cost = \text{₦}9,137,500

About This Question

This is Neco Model Questions Vol1 2020 Commerce Question 28. It is one of the objective questions from the 2020 Neco Model Questions Vol1 Commerce examination.

Difficulty level: Hard .

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