Neco Model Questions Vol1 2024 Commerce Question 45

A warehouse stores a single product with an annual demand of 12 000 units. The ordering (setup) cost per order is ₦2 500 and the holding cost is 25 % of the unit cost per year. Each unit costs ₦150. The warehouse can hold at most 1 200 units at any time. (i) Determine the Economic Order Quantity (EOQ). If the unconstrained EOQ exceeds the storage capacity, use the maximum capacity as the feasible order quantity. (ii) Assuming demand is uniform throughout the year (365 days) and the lead time is 10 days, compute the reorder point when a safety stock equal to 20 % of the average demand during lead time is kept. (iii) Using the feasible EOQ, calculate the total annual relevant cost (ordering cost plus holding cost, including safety stock). Provide the feasible EOQ (units), the reorder point (units, rounded up), and the total annual relevant cost (naira, rounded to the nearest naira).