Practice gce model questions vol1 commerce 2019 Past Questions

Question 1 View Details

A company plans to send a total of 5,001 promotional messages consisting of SMS and email. The cost per SMS is tiered: the first 1,000 SMS cost \(\N0.50\) each, the next 2,000 cost \(\N0.40\) each, and any further SMS cost \(\N0.30\) each. Email messages cost \(\N0.20\) each. The company must send at least twice as many SMS as email messages. Determine the exact numbers of SMS and email messages to be sent and calculate the total cost of the campaign, giving your answer in Naira to two decimal places.

A. SMS = 3,500, Email = 1,501, Total cost = \N1,750.20

B. SMS = 3,335, Email = 1,666, Total cost = \N1,733.70

C. SMS = 4,001, Email = 1,000, Total cost = \N1,800.30

Correct D. SMS = 3,334, Email = 1,667, Total cost = \N1,733.60

Correct Answer: D

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 2 View Details

A motor‑insurance policy has a base premium of \(\N120,000\). The driver is classified as high‑risk, attracting a loading of 25 % on the base premium. An administrative fee of 5 % is charged on the sum of the base premium and the loading. Tax of 10 % is then applied to the amount after the administrative fee. Finally, a no‑claims discount of 15 % is given on the total after tax.\n\n(a) Calculate the final premium payable by the policyholder.\n(b) The insurer expects the average claim cost to be 70 % of the final premium and adds a 20 % loading on the expected claim to achieve profit. Determine the claim amount at which the insurer would break even (i.e. premium equals 1.20 × claim).

A. Final premium = \N153,153.00; Break‑even claim = \N127,627.50

B. Final premium = \N147,262.50; Break‑even claim = \N117,810.00

C. Final premium = \N145,860.00; Break‑even claim = \N121,550.00

Correct D. Final premium = \N147,262.50; Break‑even claim = \N122,718.75

Correct Answer: D

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 3 View Details

A company issues a purchase order for 500 units of product X at a unit price of \(\N2,000\). The supplier offers a trade discount of 5 % on the total order value. If the company pays within 10 days it can also claim a cash discount of 2 % on the amount after the trade discount.\n\n(i) Calculate the amount payable when the cash discount is taken.\n(ii) Determine the effective annual interest rate that the cash discount represents (assume a 365‑day year).\n(iii) Alternatively, the company may defer payment for 30 days, forgoing the cash discount but incurring an interest charge of 3 % per annum on the amount after the trade discount, calculated for the 30‑day period. Compute the total amount payable under this option.\n(iv) Which option is financially cheaper and by how much?

A. Early payment amount = \N935,000; Effective annual rate ≈ 73.2 %; 30‑day credit amount = \N950,000.00; Early payment cheaper by \N15,000.00

B. Early payment amount = \N928,000; Effective annual rate ≈ 75.0 %; 30‑day credit amount = \N954,500.00; Early payment cheaper by \N26,500.00

C. Early payment amount = \N931,000; Effective annual rate ≈ 70.0 %; 30‑day credit amount = \N960,000.00; Early payment cheaper by \N29,000.00

Correct D. Early payment amount = \N931,000; Effective annual rate ≈ 74.5 %; 30‑day credit amount = \N952,342.46; Early payment cheaper by \N21,342.46

Correct Answer: D

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 4 View Details

A business purchases a delivery van for \(\N1,200,000\). Classify this expenditure as either capital expenditure or revenue expenditure.

A. Capital revenue

B. Revenue expenditure

Correct C. Capital expenditure

D. Operating expense

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 5 View Details

An insurer offers a health‑insurance policy. The probability that a policyholder makes a claim in a year is 0.08 and the average claim amount is \(\N50,000\). The insurer wishes to add a profit loading of 15 % on the expected claim cost and must also pay a 5 % tax on the premium charged.\n\n(a) Calculate the annual premium that should be charged.\n(b) If a particular policyholder makes a claim of \(\N70,000\) during the year, determine the insurer's net profit or loss on that policy after tax.

Correct A. Premium = \N4,830; Net loss on \N70,000 claim = \N65,170

B. Premium = \N4,950; Net loss on \N70,000 claim = \N65,050

C. Premium = \N4,600; Net loss on \N70,000 claim = \N65,400

D. Premium = \N5,000; Net loss on \N70,000 claim = \N65,000

Correct Answer: A

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 6 View Details

A partnership of three partners A, B and C invests capital for different periods. Partner A contributes ₦120,000 for 6 months, B contributes ₦80,000 for 9 months and C contributes ₦100,000 for 12 months. The profit is to be shared in proportion to the product of capital and time, but A also receives a fixed monthly salary of \(5{,}000\) ₦ for managerial work. If the total profit before salary is \(96{,}000\) ₦, determine the amount each partner receives.

Correct A. A: ₦69,818.18, B: ₦9,818.18, C: ₦16,363.64

B. A: ₦68,181.82, B: ₦9,090.91, C: ₦18,727.27

C. A: ₦65,000, B: ₦12,000, C: ₦19,000

D. A: ₦70,000, B: ₦10,000, C: ₦16,000

Correct Answer: A

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 7 View Details

A logistics company transports goods by road. The fixed cost per trip is \(50{,}000\) ₦ and the variable cost is \(120\) ₦ per tonne‑km. The company charges a freight rate of \(200\) ₦ per tonne‑km for the first 500 km and \(180\) ₦ per tonne‑km for any distance beyond 500 km. A client wants to ship 30 tonnes over 800 km. Determine whether the company makes a profit on this contract and, if so, calculate the profit amount.

A. Yes, profit = ₦1,500,000

B. Yes, profit = ₦1,750,000

C. No, loss = ₦200,000

Correct D. Yes, profit = ₦1,690,000

Correct Answer: D

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 8 View Details

An insurance company offers a two‑year motor policy. The base annual premium for a certain class of vehicle is \(45{,}000\) ₦. A fire‑risk loading of 12 % is added, then a 5 % discount is given to drivers with no claim record in the previous three years. For policies bought for two years in advance, a further 8 % discount is applied to the total premium after the previous adjustments. Calculate the total amount payable by a driver with a clean claim record who purchases a two‑year policy. Then, if the expected number of claims per policy per year is 0.04 and the average claim cost is \(150{,}000\) ₦, find the expected profit per policy over the two‑year period (ignore expenses).

Correct A. Total payable = ₦88,099.20; Expected profit = ₦76,099.20

B. Total payable = ₦78,660.00; Expected profit = ₦66,660.00

C. Total payable = ₦95,760.00; Expected profit = ₦83,760.00

D. Total payable = ₦92,736.00; Expected profit = ₦80,736.00

Correct Answer: A

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 9 View Details

A company launches a TV advertising campaign. The production cost of the ad is \(4{,}000{,}000\) ₦ (fixed). The cost of airing the ad is \(150{,}000\) ₦ per week for the first four weeks and \(120{,}000\) ₦ per week thereafter. The ad reaches 12{,}000 new customers in the first week; each subsequent week the number of new customers is 85 % of the previous week. Each new customer generates a profit of \(100\) ₦. Determine the minimum integer number of weeks the ad must run for the campaign to break even (total profit ≥ total cost). Also give the total profit earned when the ad is run for that minimum number of weeks.

A. Minimum weeks = 8; Total profit = ₦740,076

B. Minimum weeks = 6; Total profit = ₦142,804

Correct C. Minimum weeks = 7; Total profit = ₦475,383

D. Minimum weeks = 7; Total profit = ₦385,383

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 10 View Details

A home‑based baker sells cupcakes at a markup of 40 % on the total cost per cupcake. If the cost of ingredients and packaging for one cupcake is \(250\) ₦, what is the selling price per cupcake? If the baker sells 120 cupcakes in a week, what is the weekly profit?

A. Selling price = ₦350 per cupcake; Weekly profit = ₦10,800

B. Selling price = ₦325 per cupcake; Weekly profit = ₦9,000

Correct C. Selling price = ₦350 per cupcake; Weekly profit = ₦12,000

D. Selling price = ₦290 per cupcake; Weekly profit = ₦5,880

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 11 View Details

A trader purchases 150 units of a product at \(\text{₦}2,400\) each. He also pays a flat transport charge of \(\text{₦}18,000\) and a handling fee equal to \(2.5\%\) of the purchase cost (excluding transport). He intends to sell the whole stock at a uniform price and achieve a profit of \(12\%\) on his total outlay. What selling price per unit should he set?

A. 2822.4

B. 2755.2

Correct C. 2889.6

D. 2868

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 12 View Details

A shop has fixed monthly costs of \(\text{₦}45,000\) and a variable cost of \(\text{₦}120\) per item. It sells each item for \(\text{₦}250\), but offers a \(5\%\) discount on the selling price for any quantity above 400 units. Determine the minimum number of items the shop must sell in a month to earn a profit of exactly \(\text{₦}30,000\).

A. 576

Correct B. 639

C. 640

D. 638

Correct Answer: B

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 13 View Details

A company needs to raise \(\text{₦}5,000,000\). It can either (i) obtain a bank loan at 9\% interest per annum, with interest tax‑deductible at a corporate tax rate of 30\% and a flotation cost of 2\% of the loan amount; or (ii) issue 10\% preference shares, whose dividends are not tax‑deductible, with a flotation cost of 5\% of the issue amount. Which source of finance has the lower after‑tax cost, and what is that cost (expressed as a percentage of the net funds received)?

A. Preference shares, after‑tax cost ≈6.80\%

B. Bank loan, after‑tax cost ≈7.20\%

Correct C. Bank loan, after‑tax cost ≈6.43\%

D. Preference shares, after‑tax cost ≈9.50\%

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 14 View Details

An investor buys 1,200 shares of a listed company in three transactions: 400 shares at \(\text{₦}45\) each, 500 shares at \(\text{₦}48\) each, and 300 shares at \(\text{₦}46\) each. Each purchase incurs a brokerage fee of 1.2\% of the transaction value. Later the investor sells the shares in two transactions: 700 shares at \(\text{₦}52\) each and 500 shares at \(\text{₦}50\) each, with a brokerage fee of 1.5\% on each sale and a capital‑gains tax of 10\% on the profit of each sale. Assuming the cost base per share is the average purchase price (including purchase brokerage), calculate (a) the total profit after all brokerage and tax charges, and (b) the overall rate of return on the original net investment. Express the profit in naira and the return as a percentage to two decimal places.

A. Profit = ₦3,100.00; Return ≈5.50\%

B. Profit = ₦2,950.00; Return ≈5.20\%

Correct C. Profit = ₦3,608.46; Return ≈6.39\%

D. Profit = ₦4,120.75; Return ≈7.30\%

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 15 View Details

A firm's capital structure consists of 40\% equity, 30\% preference shares and 30\% debentures. The nominal cost of equity is 12\% (dividend yield), the cost of preference shares is 8\% (dividend yield), and the cost of debentures is 9\% per annum. The corporate tax rate is 35\%, and the flotation costs are 5\% for equity, 4\% for preference shares and 2\% for debentures. Compute the weighted average cost of capital (WACC) for the firm, taking into account the tax shield on interest and the flotation costs. Give your answer as a percentage to two decimal places.

A. 10.21

B. 11.03

Correct C. 9.34

D. 8.57

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 16 View Details

A company wants to achieve a total of (250) gross rating points (GRPs) for its advertising campaign, split between TV and radio. The cost per GRP is \(\text{₦}150{,}000\) for TV and \(\text{₦}90{,}000\) for radio. At least (40\%\) of the total GRPs must be on TV, and the number of TV GRPs must be a multiple of 5. The total advertising budget is exactly \(\text{₦}30{,}000{,}000\). How many GRPs should be allocated to TV and to radio respectively?

Correct A. TV GRPs = 125, Radio GRPs = 125

B. TV GRPs = 115, Radio GRPs = 135

C. TV GRPs = 120, Radio GRPs = 130

D. TV GRPs = 130, Radio GRPs = 120

Correct Answer: A

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 17 View Details

A retailer faces an annual demand of \(12{,}000\) units for a product. The ordering cost is \(\text{₦}20{,}000\) per order and the holding cost is \(25\%\) of the unit cost per year. The supplier offers quantity discounts: unit cost is \(\text{₦}800\) for orders below \(1{,}000\) units, \(\text{₦}760\) for orders of \(1{,}000\) units or more, and \(\text{₦}720\) for orders of \(2{,}500\) units or more. Determine the order quantity that minimises the total annual cost.

A. 2000

Correct B. 2500

C. 1500

D. 1000

Correct Answer: B

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 18 View Details

A bank provides a loan of \(\text{₦}5{,}000{,}000\) to be repaid in equal monthly instalments over \(5\) years. The nominal annual interest rate is \(12\%\) convertible monthly for the first \(2\) years and \(10\%\) convertible monthly for the remaining \(3\) years. Assuming the instalment amount remains the same throughout the loan, calculate the monthly instalment payable (rounded to the nearest naira).

Correct A. ₦109650 (approximately)

B. ₦108500 (approximately)

C. ₦112300 (approximately)

D. ₦106750 (approximately)

Correct Answer: A

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 19 View Details

A wholesaler purchases a product at a cost of \(\text{₦}1{,}200\) per unit. He offers retailers a trade discount of \(5\%\) on his list price. After the discount, the retailer's selling price must give the retailer a \(20\%\) profit margin on the retailer's cost. The wholesaler also wants to achieve a gross profit margin of \(15\%\) on his own cost after giving the trade discount. What should be the wholesaler's list price per unit (rounded to the nearest naira)?

A. ₦1380

B. ₦1520

Correct C. ₦1453

D. ₦1490

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 20 View Details

A company receives an invoice for goods amounting to \(\text{₦}2{,}500{,}000\). The supplier grants a trade discount of \(3\%\) on the invoice amount and, if payment is made within \(10\) days, an early‑payment discount of \(2\%\) on the amount after the trade discount. Value‑added tax (VAT) of \(7.5\%\) is applied on the amount after the trade discount but before the early‑payment discount. The company pays within the discount period. (a) Calculate the net amount payable. (b) Determine the overall effective discount percentage on the original invoice amount (including the effect of VAT). (c) Assuming the normal payment term is \(30\) days, compute the effective annualised discount rate based on the discount obtained for paying \(20\) days early.

A. (a) ₦2 545 000 (approximately); (b) 4.70 %; (c) about 92 % per annum

B. (a) ₦2 560 000 (approximately); (b) 4.80 %; (c) about 95 % per annum

C. (a) ₦2 500 000 (approximately); (b) 5.00 %; (c) about 85 % per annum

Correct D. (a) ₦2 554 738 (approximately); (b) 4.94 %; (c) about 90 % per annum

Correct Answer: D

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 21 View Details

An electronics retailer advertises a smartphone at a marked price of ₦80,000, stating a 24‑month warranty and a "free 2‑year insurance cover". The fine print limits the insurance to a maximum claim of ₦20,000 per incident and excludes water damage. After 10 months the phone is dropped in water and stops working. The retailer offers two options: (i) Repair the phone at a cost of ₦12,000, with a guarantee that the repair will last for the remaining warranty period. (ii) Provide a replacement phone of the same model at a 15\% discount on the marked price, the original 24‑month warranty continuing. The consumer chooses option (ii). Six months later the replacement fails due to a manufacturing defect (not water damage). The retailer now offers a full refund of the amount paid for the replacement, minus a restocking fee of 5\% of the original marked price. Under the Consumer Protection Act, if a product fails twice within the warranty period, the consumer is entitled to a refund of the total amount paid for the product(s) plus a statutory compensation equal to 10\% of that total amount. Calculate: a) the total amount the consumer actually paid out‑of‑pocket for the phone; b) the total monetary loss the consumer suffers after receiving the final refund and statutory compensation, compared with the situation where the original phone had functioned perfectly for the full 24 months (assume the consumer would have derived a usage value of ₦30,000 over the 24 months); c) the amount of statutory compensation the consumer is entitled to under the Act.

A. a) 138000; b) 22200; c) 13800

B. a) 148500; b) 19000; c) 14900

C. a) 158000; b) 18000; c) 15800

Correct D. a) 148000; b) 19200; c) 14800

Correct Answer: D

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 22 View Details

A Nigerian exporter sells cocoa beans to a European buyer. The contract price is quoted in euros at €0.45 per kilogram. The current exchange rate is ₦560 per euro. The exporter must pay a 5\% export duty on the value in naira, and the buyer's country imposes a 12\% import tariff on the value in euros. In addition, the exporter incurs a freight cost of ₦30 per kilogram, paid in naira. Determine the minimum selling price per kilogram in naira that the exporter must set to achieve a profit margin of 20\% on the total cost (including duty, freight, and the base cost after conversion). Also compute the effective total cost per kilogram in euros after all tariffs and duties.

A. 340.00; 0.540

B. 360.00; 0.480

Correct C. 353.52; 0.504

D. 345.00; 0.560

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 23 View Details

A logistics company offers two shipping options for a batch of goods from Lagos to Accra. Option A: a flat rate of ₦150,000 per shipment for any weight up to 10 000 kg, plus ₦12 per kilogram for any weight above 10 000 kg. Option B: a variable rate of ₦20 per kilogram for the whole shipment, but a discount of 10\% applies if the total weight exceeds 8 000 kg. (i) Find the weight (in kilograms) at which the two options cost the same. (ii) For a shipment weighing 12 500 kg, state which option is cheaper and calculate the cost difference.

Correct A. 8,333.33 kg; Option A cheaper by 45,000

B. 8,000.00 kg; Option B cheaper by 5,000

C. 9,000.00 kg; Option B cheaper by 10,000

D. 7,500.00 kg; Option A cheaper by 30,000

Correct Answer: A

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 24 View Details

A freight train travels from City X to City Y, a distance of 720 km. For the first 300 km it runs at an average speed of 80 km h\(^{-1}\). It then stops for a mandatory inspection lasting 45 minutes. After the stop it covers the remaining distance at a reduced speed of 60 km h\(^{-1}\) because of track maintenance. Halfway through this second leg the train suffers an unexpected delay of 30 minutes. (a) Determine the total journey time in hours and minutes. (b) If the railway company wants to guarantee a maximum journey time of 12 hours, what average speed must the train maintain for the second leg (after the inspection) assuming no further delays?

A. 12 hours 30 minutes; 54 km/h

B. 11 hours 45 minutes; 60 km/h

Correct C. 12 hours 0 minutes; 56 km/h

D. 13 hours 0 minutes; 50 km/h

Correct Answer: C

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

Question 25 View Details

A shop buys a batch of goods for ₦25 000 and sells them for ₦32 500. Calculate the profit percentage based on the cost price.

A. 25

B. 35

C. 28

Correct D. 30

Correct Answer: D

Want to see the full step-by-step solution? Unlock AI Explanation & Analytics

gce model questions vol1 2019 commerce | Objective

Master the Exam!

Help others prepare! Share this practice hub: