Neco Model Questions Vol1 2021 Commerce Question 22

Practice objective / multiple choice question 22 from the 2021 Neco Model Questions Vol1 Commerce examination.

Neco Model Questions Vol1 2021 Commerce Objective / Multiple Choice Hard Difficulty
Question 22 NECO_MODEL_QUESTIONS_VOL1 • 2021 • COMMERCE • objective

A warehouse handles a product whose average monthly demand is 12,000 units, with a standard deviation of 1,200 units per month. Lead time for replenishment is 10 days. The firm desires a 95 % service level (\(z = 1.645\)). The unit cost is ₦500, the holding cost rate is 15 % of unit cost per year, and the ordering cost is ₦2,500 per order. (a) Determine the safety stock required. (b) Calculate the economic order quantity (EOQ) that includes this safety stock. (c) Compute the annual total cost (ordering + holding + purchase) using the order quantity from part (b).

Answer Options

A. Safety stock ≈ 1,140 units; EOQ ≈ 3,150 units; Order quantity ≈ 4,300 units; Annual total cost ≈ ₦72,900,000
B. Safety stock ≈ 1,200 units; EOQ ≈ 3,050 units; Order quantity ≈ 4,250 units; Annual total cost ≈ ₦73,500,000
Correct Answer C. Safety stock ≈ 1,140 units; EOQ ≈ 3,098 units; Order quantity ≈ 4,238 units; Annual total cost ≈ ₦72,243,875
D. Safety stock ≈ 1,080 units; EOQ ≈ 3,200 units; Order quantity ≈ 4,280 units; Annual total cost ≈ ₦71,800,000
Correct Answer
C
Correct Option:
Safety stock ≈ 1,140 units; EOQ ≈ 3,098 units; Order quantity ≈ 4,238 units; Annual total cost ≈ ₦72,243,875

About This Question

This is Neco Model Questions Vol1 2021 Commerce Question 22. It is one of the objective questions from the 2021 Neco Model Questions Vol1 Commerce examination.

Difficulty level: Hard .

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