Waec Model Questions Vol1 2017 Commerce Question 6

Practice essay / theory question 6 from the 2017 Waec Model Questions Vol1 Commerce examination. This question covers Wholesale Trade .

Waec Model Questions Vol1 2017 Commerce Essay / Theory
Topic: Wholesale Trade
Question 6 WAEC_MODEL_QUESTIONS_VOL1 • 2017 • COMMERCE • essay

A wholesaler purchases 2,000 units of a product from a manufacturer at a list price of ₦1,200 per unit. The manufacturer offers a trade discount of 12 % on the list price. The wholesaler pays the balance within 10 days and is eligible for a cash discount of 3 % on the amount after trade discount. The wholesaler's operating expenses amount to ₦150,000 per month, and the wholesaler plans to sell the entire stock within the month.

Question Parts

( a )
Compute the effective purchase price per unit after applying the trade discount and the cash discount.
( b )
Determine the total cost incurred by the wholesaler for the whole stock, including operating expenses.
( c )
If the wholesaler sets a uniform selling price of ₦1,500 per unit to retailers, calculate the gross profit and the profit margin (as a percentage of sales).
( d )
The wholesaler is considering offering a 5 % trade discount to retailers on the selling price while keeping the cash discount terms unchanged for retailers who pay within 10 days. Assuming the wholesaler continues to sell all units, compute the new gross profit and compare it with the profit in part (c). State whether the discount policy improves or reduces the wholesaler’s profitability.
( e )
Briefly explain two reasons why a wholesaler might prefer to give trade discounts to retailers rather than reducing the cash discount period.

Detailed Solution & Marking Scheme

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

Reveal Answer

About This Question

This is Waec Model Questions Vol1 2017 Commerce Question 6. It is one of the essay questions from the 2017 Waec Model Questions Vol1 Commerce examination.

The question covers Wholesale Trade .

View More Waec Model Questions Vol1 2017 Commerce Questions More Waec Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support