Waec Model Questions Vol1 2024 Commerce Question 6

Practice essay / theory question 6 from the 2024 Waec Model Questions Vol1 Commerce examination. This question covers Wholesale Trade .

Waec Model Questions Vol1 2024 Commerce Essay / Theory
Topic: Wholesale Trade
Question 6 WAEC_MODEL_QUESTIONS_VOL1 • 2024 • COMMERCE • essay

A wholesale dealer purchases a single product from a manufacturer and sells it to retailers. The following data apply: - Purchase price per unit = ₦1,200. - Freight cost per unit = ₦80. - Handling cost per unit = ₦20. - Manufacturer’s credit terms: 2 % discount if paid within 10 days, otherwise net 30 days. - Selling price to retailers = ₦1,800 per unit. - Wholesaler’s credit terms to retailers: 3 % discount if paid within 15 days, otherwise net 45 days. - Sales commission = 5 % of the selling price. - Fixed monthly operating costs (rent, salaries, utilities) = ₦80,000. Answer the following questions:

Question Parts

( a )
Calculate the effective cost per unit if the wholesaler takes the manufacturer’s 2 % discount and compare it with the cost per unit if the discount is not taken. Indicate which option is cheaper and show all calculations.
( b )
Using the cheaper effective cost obtained in part (a), determine the contribution margin per unit and compute the break‑even volume in units. Show your working.
( c )
If the wholesaler extends the credit period offered to retailers from net 45 days to net 60 days (keeping the 3 % discount for early payment), discuss qualitatively how this change could affect the wholesaler’s cash flow and the relevance of the break‑even analysis.

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About This Question

This is Waec Model Questions Vol1 2024 Commerce Question 6. It is one of the essay questions from the 2024 Waec Model Questions Vol1 Commerce examination.

The question covers Wholesale Trade .

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