Waec Model Questions Vol1 2021 Commerce Question 2

Practice essay / theory question 2 from the 2021 Waec Model Questions Vol1 Commerce examination. This question covers Trade .

Waec Model Questions Vol1 2021 Commerce Essay / Theory
Topic: Trade
Question 2 WAEC_MODEL_QUESTIONS_VOL1 • 2021 • COMMERCE • essay

A Nigerian cocoa farmer aggregates 10,000 kg of cocoa beans and sells them to a foreign processing company. The agreed FOB price is ₦150 per kg. The current exchange rate is ₦800 = $1. The shipment will incur freight of $1,200 and insurance of $300, payable in dollars. The importing country imposes a 10% import duty on the value of the cocoa in dollars, calculated on the FOB price after conversion. The exporter also pays a 5% export tax on the FOB value in Naira.

Question Parts

( a )
Calculate the total revenue in dollars that the exporter will receive after converting the FOB price, adding freight and insurance, and deducting the import duty and export tax. Show all steps.
( b )
If the exchange rate rises to ₦850 = $1, recalculate the total revenue in dollars, assuming all other costs remain unchanged. Comment on the effect of the exchange‑rate movement on the exporter’s earnings.
( c )
Based on the calculations, recommend whether the exporter should lock in the exchange rate using a forward contract, providing two reasons.

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About This Question

This is Waec Model Questions Vol1 2021 Commerce Question 2. It is one of the essay questions from the 2021 Waec Model Questions Vol1 Commerce examination.

The question covers Trade .

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