Practice gce model questions vol1 commerce 2020 Past Questions

Question 1 View Details

An exporter in Nigeria has a total local cost of $ \text{₦}1{,}200{,}000 $ for a shipment. The goods are priced FOB at $ \$8{,}000 $. The overseas buyer will pay in euros. The exchange rates are $ €1 = \$1.10 $ and $ \$1 = \text{₦}410 $. The bank charges a commission of $2\%$ on the euro amount received. Nigerian import duty is $15\%$ of the FOB value expressed in naira (after conversion). The exporter wishes to earn a profit equal to $20\%$ of the total cost (including duty and bank commission). What euro amount must the buyer pay so that the exporter meets the desired profit?

A. ≈ €5,100

B. ≈ €3,950

Correct C. ≈ €4,594

D. ≈ €4,200

Correct Answer: C

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Question 2 View Details

A shop purchases goods for $ \text{₦}150{,}000 $. It adds a markup of $30\%$ to set the selling price. During a promotion a discount of $10\%$ is offered on the selling price, and a sales tax of $5\%$ is then added to the discounted price. What is the final amount the customer pays?

A. ₦190,500

B. ₦176,250

C. ₦180,000

Correct D. ₦184,275

Correct Answer: D

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Question 3 View Details

A retailer incurs a variable cost of $ \text{₦}250 $ per unit and fixed monthly costs of $ \text{₦}120{,}000 $. The normal selling price is set by adding a $40\%$ markup on the variable cost. For orders of $100$ units or more the retailer gives a bulk discount of $12\%$ on this selling price (before tax). A sales tax of $7.5\%$ is applied to the discounted price. The retailer wants to achieve a profit of at least $ \text{₦}50{,}000 $ after tax in a month in which the bulk discount is used. What is the minimum number of units that must be sold that month?

Correct A. 210

B. 215

C. 205

D. 225

Correct Answer: A

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Question 4 View Details

A logistics company charges a freight rate of $ \text{₦}0.75 $ per kilogram per kilometre for the first $500$ km of a journey and $ \text{₦}0.60 $ per kilogram per kilometre for each kilometre beyond $500$ km. A shipment weighing $1{,}200$ kg is to be transported over a distance of $850$ km. In addition, a handling fee of $ \text{₦}15{,}000 $ is added to each shipment. If the customer pays within $10$ days, a cash discount of $3\%$ is applied to the total freight charge (excluding the handling fee). What is the total amount payable by the customer?

A. ₦688,500

B. ₦710,000

Correct C. ₦695,940

D. ₦702,150

Correct Answer: C

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Question 5 View Details

An importer intends to buy goods worth $ €250{,}000 $ in three months. The current spot rate is $ \text{₦}420 $ per $ €1 $ and the three‑month forward rate is quoted at $ \text{₦}425 $ per $ €1 $. If the importer waits, the spot rate at that time is expected to follow a normal distribution with mean $ \text{₦}430 $ and standard deviation $ \text{₦}10 $. The importer wants the probability of paying more than the forward‑contract amount to be less than $5\%$. Should the importer lock in the forward contract? If the answer is no, state the maximum spot rate (to the nearest naira) that the importer can tolerate while keeping the risk below $5\%$.

A. No, the importer should not lock in the forward contract. The 5 % risk threshold corresponds to a spot rate of about $\text{₦}452$ per €.

B. Yes, the importer should lock in the forward contract. The 5 % risk threshold corresponds to a spot rate of about $\text{₦}440$ per €.

Correct C. Yes, the importer should lock in the forward contract. The 5 % risk threshold corresponds to a spot rate of about $\text{₦}446$ per €.

D. Yes, the importer should lock in the forward contract. The 5 % risk threshold corresponds to a spot rate of about $\text{₦}460$ per €.

Correct Answer: C

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Question 6 View Details

A company advertises on TV and radio. TV reaches 60% of the target market, radio reaches 45%, and 30% are reached by both. The company wants at least 80% total reach after adding newspaper ads. Newspaper ads reach 15% of the market, overlapping 7% with TV, 5% with radio and 1% with both TV and radio. How many additional percentage points of unique reach must the newspaper provide to meet the 80% target?

A. 2

B. 0

C. 3

Correct D. 1

Correct Answer: D

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Question 7 View Details

A firm can ship goods either by road or by rail. Road transport costs a fixed $£120$ per shipment plus $£0.45$ per kilogram. Rail transport costs a fixed $£200$ per shipment plus $£0.30$ per kilogram, but a rail shipment must contain at least 400 kg. Determine the range of shipment weights for which road transport is cheaper than rail, and state the cost of a 500 kg shipment using the cheaper method.

A. Road is cheaper for 400 kg ≤ weight < 533 kg; cost for 500 kg = £340

Correct B. Road is cheaper for 400 kg ≤ weight < 533 kg; cost for 500 kg = £345

C. Road is cheaper for 350 kg ≤ weight < 533 kg; cost for 500 kg = £340

D. Road is cheaper for 400 kg ≤ weight < 600 kg; cost for 500 kg = £350

Correct Answer: B

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Question 8 View Details

A retailer purchases a batch of goods for a total cost of $₦48,000$. He marks the batch up by 25% on cost, then offers a seasonal discount of 10% on the marked price. After the sale, a VAT of 5% is added to the discounted price, which the customer pays. What is the retailer's profit as a percentage of his original cost?

A. 15

B. 20

C. 10

Correct D. 12.5

Correct Answer: D

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Question 9 View Details

A warehouse stores a single product. Annual demand is 12,000 units. Ordering cost per order is $₦500$. Holding cost is 20% of the unit cost per year, and the unit cost is $₦200$. The warehouse can hold at most 800 units at any time. Using the EOQ model while respecting the space limit, determine the optimal order quantity, the resulting annual total cost (ordering + holding + purchase), and the reorder point if lead time is 5 days and demand is uniform throughout the year.

Correct A. Order quantity = 548 units; total annual cost ≈ ₦2,421,909; reorder point = 165 units

B. Order quantity = 500 units; total annual cost ≈ ₦2,350,000; reorder point = 150 units

C. Order quantity = 450 units; total annual cost ≈ ₦2,200,000; reorder point = 140 units

D. Order quantity = 600 units; total annual cost ≈ ₦2,500,000; reorder point = 180 units

Correct Answer: A

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Question 10 View Details

A customer can borrow $₦1,000,000$ under two loan offers. Offer A: nominal annual interest rate 12% compounded monthly. Offer B: nominal annual interest rate 11.5% compounded quarterly. Both loans are for 3 years. Which offer results in the lower total interest payable, and what is the total amount payable for each offer (rounded to the nearest naira)?

A. Offer A is cheaper; total payable - Offer A: ₦1,430,900, Offer B: ₦1,405,000

B. Offer B is cheaper; total payable - Offer A: ₦1,420,000, Offer B: ₦1,405,000

Correct C. Offer B is cheaper; total payable - Offer A: ₦1,430,900, Offer B: ₦1,405,000

D. Offer B is cheaper; total payable - Offer A: ₦1,430,900, Offer B: ₦1,415,000

Correct Answer: C

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Question 11 View Details

A company has a total advertising budget of $\text{₦}1{,}200{,}000$. The cost per 1,000 units of audience is $\text{₦}20{,}000$ for TV, $\text{₦}5{,}000$ for radio and $\text{₦}2{,}000$ for online. The company must allocate at least 30 % of the budget to TV, must reach at least $300{,}000$ people in total, and the number of online clicks must be at least twice the number of radio listeners. If the allocations are made in whole thousands, what is the minimum number of online clicks (in thousands) that must be purchased?

Correct A. 190

B. 200

C. 180

D. 210

Correct Answer: A

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Question 12 View Details

A retailer sells two products, A and B. Product A costs $\text{₦}150$ per unit and is sold with a markup of $m$% followed by a 10 % seasonal discount on the marked price. Product B costs $\text{₦}200$ per unit and is sold with the same markup $m$% followed by a 15 % discount. In a month the retailer sells 120 units of A and 80 units of B and wants an overall profit margin of 20 % on total sales revenue. What markup percentage $m$ (to one decimal place) must be applied?

Correct A. 42.6

B. 45.2

C. 40.5

D. 38.9

Correct Answer: A

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Question 13 View Details

An insurance company calculates a motor‑insurance premium as follows: a base premium equal to 5 % of the insured value, a loading of 20 % for drivers under 25, a no‑claims discount of 15 % for a 2‑year bonus, and finally a tax of 2.5 % applied to the premium after loading and discount. A 23‑year‑old driver insures a vehicle for $\text{₦}2{,}000{,}000$ and has a 2‑year no‑claims bonus. What is the final premium payable, rounded to the nearest naira?

A. 105550

Correct B. 104550

C. 103500

D. 104000

Correct Answer: B

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Question 14 View Details

A consumer can choose between two mobile‑data plans for the next 12 months.\ \nPlan X: fixed monthly fee $\text{₦}5{,}000$, data at $\text{₦}800$ per GB, and a one‑time activation fee $\text{₦}2{,}000$ that is waived if a 12‑month contract is signed.\ \nPlan Y: no fixed monthly fee, a subscription fee $\text{₦}1{,}200$ per month, and tiered data charges - first 5 GB at $\text{₦}1{,}000$ per GB, next 5 GB at $\text{₦}700$ per GB, and any usage above 10 GB at $\text{₦}500$ per GB. A one‑time device subsidy of $\text{₦}3{,}000$ is given if a 24‑month contract is signed.\ \nAssuming the consumer will use exactly 12 GB each month for the next 12 months and will sign the contract that gives the lowest net cost, which plan is cheaper and by how much (to the nearest naira)?

A. Plan Y, ₦51800

B. Plan Y, ₦46800

Correct C. Plan Y, ₦61800

D. Plan X, ₦175200

Correct Answer: C

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Question 15 View Details

A company needs $\text{₦}50{,}000{,}000$ for expansion. It can raise the funds by issuing 30 % equity at a cost of 12 %, borrowing 40 % from a bank at an interest rate of 8 % (corporate tax rate 30 %), and using the remaining 30 % from retained earnings at a cost of 6 %. Calculate the weighted average cost of capital (WACC) for the project (to two decimal places) and state the annual interest expense on the bank loan.

Correct A. WACC = 7.64%, Interest = ₦1,600,000

B. WACC = 7.50%, Interest = ₦1,500,000

C. WACC = 8.00%, Interest = ₦2,000,000

D. WACC = 7.84%, Interest = ₦1,800,000

Correct Answer: A

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Question 16 View Details

An insurance company calculates the premium for a motor policy as follows: a base premium equal to a certain percentage of the sum insured; a loading of $20\%$ is added to the base premium for administrative costs; a government tax of $5\%$ is then applied to the loaded amount; finally, a discount of $10\%$ is offered if the policyholder pays the premium annually in advance. The company wishes to earn a profit equal to $15\%$ of the sum insured before the discount is applied. If the sum insured is $2{,}000{,}000$ and the loading and tax rates remain as above, what base‑premium rate (as a percentage of the sum insured) should be used to meet the profit target? Give your answer to one decimal place.

A. 55.7%

Correct B. 57.7%

C. 52.3%

D. 60.2%

Correct Answer: B

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Question 17 View Details

Three partners A, B and C run a business. Their capital contributions are $40{,}000$, $60{,}000$ and $100{,}000$ naira respectively. Interest on capital is charged at $8\%$ per annum. Salaries are paid as follows: A receives $5{,}000$ naira, B receives $8{,}000$ naira and C receives nothing. After all interest and salaries have been paid, the remaining profit to be shared is $48{,}000$ naira, which is divided in the ratio of the partners' capital contributions. What is the total amount that partner C receives (interest plus his share of the remaining profit)?

A. 30000

B. 28000

Correct C. 32000

D. 34000

Correct Answer: C

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Question 18 View Details

A wholesaler purchases a product at a cost price of $150$ naira per unit. He adds a markup of $30\%$ to set his wholesale price, and then offers a trade discount of $12\%$ on that price to retailers. His fixed monthly overheads amount to $45{,}000$ naira. How many units must he sell in a month to achieve a net profit of $60{,}000$ naira after allowing for the discount and covering the overheads? Give the smallest whole number of units.

A. 4700

Correct B. 4862

C. 4850

D. 4920

Correct Answer: B

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Question 19 View Details

A company's shares are currently trading at $250$ naira each. It announces a 1‑for‑4 rights issue at a subscription price of $180$ naira. Existing shareholders may subscribe to one new share for every four held, so the total number of shares will increase by $25\%$ if the rights are fully exercised. (a) What is the theoretical ex‑rights price per share? (b) If the company pays an annual dividend of $30$ naira per share, what is the dividend yield based on the ex‑rights price (expressed as a percentage to one decimal place)? (c) Given that earnings per share before the rights issue are $45$ naira, calculate the new price‑earnings (P/E) ratio after the rights issue (to two decimal places).

A. ₦240, 13.0%, 6.30

B. ₦230, 12.2%, 6.80

C. ₦225, 11.5%, 7.00

Correct D. ₦236, 12.7%, 6.56

Correct Answer: D

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Question 20 View Details

An importer in Nigeria needs to purchase 10{,}000 units of a product. Supplier X quotes a price of US\$12 per unit, while Supplier Y quotes $10$ euros per unit. The prevailing exchange rates are 1 US\$ = $460$ naira and 1 euro = $520$ naira. An import tariff of $5\%$ (ad valorem) is levied on the total CIF value, and a fixed handling fee of $2{,}000$ naira is charged per shipment (the same for either supplier). Which supplier offers the lower total cost in naira? Show your calculation and give the name of the cheaper supplier.

A. Supplier X

B. Neither supplier

Correct C. Supplier Y

D. Both suppliers have equal cost

Correct Answer: C

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Question 21 View Details

A retailer purchases 200 shirts for a total cost of ₦120,000. He intends to sell 120 shirts at a discount of $15\%$ on the marked price and the remaining 80 shirts at the full marked price. He wants an overall profit of $20\%$ on his total cost. What should be the marked price per shirt (in naira, correct to 2 dp)?

A. 750.00

B. 815.37

Correct C. 791.21

D. 791.20

Correct Answer: C

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Question 22 View Details

Three partners A, B and C invest in a business. A invests ₦50,000 for 6 months, B invests ₦30,000 for 9 months and C invests ₦20,000 for 12 months. The partnership earns a total profit of ₦48,000. Before sharing profit, each partner receives interest on his capital at 5 % per annum for the period his capital was invested. How much total amount (interest + profit share) does each partner receive?

A. A: ₦17,600.00; B: ₦16,200.00; C: ₦14,200.00

B. A: ₦18,250.00; B: ₦15,750.00; C: ₦13,500.00

C. A: ₦17,900.00; B: ₦15,900.00; C: ₦14,300.00

Correct D. A: ₦17,793.75; B: ₦16,000.00; C: ₦14,206.25

Correct Answer: D

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Question 23 View Details

A trader imports 500 kg of cocoa beans at a cost of ₦1,200 per kilogram. Freight charges are 8 % of the cost of the goods and insurance is a flat ₦30,000. What is the total landed cost of the cocoa beans?

A. 690000

B. 660000

C. 702000

Correct D. 678000

Correct Answer: D

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Question 24 View Details

A customer deposits ₦250,000 in a bank account that offers a nominal interest rate of $r$% per annum, compounded quarterly. The bank deducts a maintenance fee of ₦1,500 at the end of each quarter. After 2 years the balance in the account is observed to be ₦315,000. What is the effective annual interest rate (to two decimal places) that the customer actually earned, ignoring the fees?

Correct A. 14.36

B. 12.50

C. 15.20

D. 13.85

Correct Answer: A

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Question 25 View Details

A retailer's opening stock at the start of the year is ₦80,000 and purchases during the year total ₦240,000. The closing stock at year‑end is ₦70,000 and net sales for the year are ₦500,000.\n(a) Calculate the inventory turnover ratio and the average days in inventory.\n(b) If the retailer wishes to reduce the average days in inventory to 60 days, what should be the target closing stock, assuming opening stock and purchases remain unchanged?

A. 120.0 days turnover 3.50; target closing stock ₦1,200

Correct B. 109.5 days turnover 3.33; target closing stock ₦1,086

C. 85.0 days turnover 2.90; target closing stock ₦800

D. 95.2 days turnover 3.10; target closing stock ₦950

Correct Answer: B

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