Waec Model Questions Vol1 2020 Commerce Question 6

Practice essay / theory question 6 from the 2020 Waec Model Questions Vol1 Commerce examination. This question covers Wholesale Trade, Trade and cash discounts, Markup and pricing, Cost‑Volume‑Profit analysis .

Waec Model Questions Vol1 2020 Commerce Essay / Theory
Topics: Wholesale Trade Trade and cash discounts Markup and pricing Cost‑Volume‑Profit analysis
Question 6 WAEC_MODEL_QUESTIONS_VOL1 • 2020 • COMMERCE • essay

A wholesaler purchases a product from a manufacturer. The list price is ₦8,000 per unit and the wholesaler orders 1,000 units. The manufacturer grants a trade discount of 12 % on the list price. If the wholesaler pays within 10 days, a cash discount of 2 % is allowed on the net amount after trade discount; otherwise payment is due in 30 days with no cash discount. The wholesaler adds a markup of 30 % on the net purchase cost to determine the selling price to retailers. Fixed operating costs amount to ₦1,200,000 per month. Handling cost of ₦200 per unit is incurred after the purchase. Answer the following questions:

Question Parts

( a )
Determine the net purchase cost per unit after the 12 % trade discount.
( b )
If the wholesaler takes the cash discount, compute the effective cost per unit (including handling).
( c )
Compute the selling price per unit to retailers (based on the net purchase cost before cash discount) and the contribution margin per unit.
( d )
Using the contribution margin from part (c), calculate the break‑even volume in units for the wholesaler.
( e )
Discuss the impact of offering the 30‑day credit (no cash discount) on the wholesaler’s cash flow and profitability, and recommend which payment term should be adopted.

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About This Question

This is Waec Model Questions Vol1 2020 Commerce Question 6. It is one of the essay questions from the 2020 Waec Model Questions Vol1 Commerce examination.

The question covers Wholesale Trade, Trade and cash discounts, Markup and pricing, Cost‑Volume‑Profit analysis .

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