Gce Model Questions Vol1 2017 Commerce Question 4

Practice essay / theory question 4 from the 2017 Gce Model Questions Vol1 Commerce examination. This question covers Foreign Trade .

Gce Model Questions Vol1 2017 Commerce Essay / Theory
Topic: Foreign Trade
Question 4 GCE_MODEL_QUESTIONS_VOL1 • 2017 • COMMERCE • essay

A Nigerian cocoa exporter ships 25 tonnes of high‑quality cocoa beans to a buyer in the Netherlands. The contract is priced at €2,200 per tonne on an FOB (Free on Board) basis. The current exchange rate is ₦560 per €1. Shipping and insurance costs amount to €0.30 per tonne and are payable by the exporter. The Nigerian government imposes a 5 % export duty on the FOB value, and the exporter must also pay a fixed processing fee of ₦45,000. The exporter’s overheads (administrative, marketing) for the shipment are ₦120,000.

Question Parts

( a )
Calculate the total export revenue in Naira that the exporter will receive from the buyer.
( b )
Determine the total cost in Naira incurred by the exporter (including shipping, insurance, export duty, processing fee and overheads).
( c )
Compute the net profit earned by the exporter in Naira.
( d )
If the Naira depreciates by 5 % against the euro before the payment is received, recalculate the net profit and comment on how exchange‑rate risk affects the exporter’s earnings.
( e )
Briefly evaluate whether FOB or CIF (Cost, Insurance, Freight) terms would be more advantageous for the exporter in this transaction.

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About This Question

This is Gce Model Questions Vol1 2017 Commerce Question 4. It is one of the essay questions from the 2017 Gce Model Questions Vol1 Commerce examination.

The question covers Foreign Trade .

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