gce model questions vol1 2021 commerce | Essay

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Question 1 View Details
Outline the three principal functions of commerce and evaluate how each function contributes to the economic development of Nigeria.
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Question 2 View Details
A Nigerian trader imports 500 electronic gadgets from China. The invoice price per unit is $120 and the freight charge is $2,500. Import duty is charged at 20 % of the CIF (Cost, Insurance, Freight) value and insurance costs 1.5 % of the CIF value. The prevailing exchange rate at the time of payment is ₦560 per US$. The trader intends to sell each gadget for ₦80,000 in the local market. Before the goods are sold, the naira depreciates and the exchange rate rises to ₦580 per US$. Answer the following:
Question Parts
(a)
Calculate the total cost in naira of the imported goods, including duty and insurance, using the original exchange rate of ₦560.
(b)
Determine the profit (or loss) per unit and the total profit if the gadgets are sold at the stated selling price after the exchange rate has risen to ₦580. Explain how the exchange‑rate movement has affected the profit.
(c)
If the trader wishes to achieve a profit margin of 25 % on the total cost calculated at the original exchange rate (₦560), what should be the minimum selling price per unit in naira, assuming the exchange rate stays at ₦580? State whether the current selling price of ₦80,000 meets this target.
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Question 3 View Details
A home‑based trader purchases 500 units of a handmade ceramic mug at a unit cost of ₦1,200. She sells 300 units at ₦1,800 each and the remaining units at a discounted price. Her monthly fixed costs (rent, electricity, advertising) total ₦120,000 and she incurs a packaging cost of ₦50 per unit sold.
Question Parts
(a)
Determine the discounted price per unit that will allow the trader to achieve a profit of exactly ₦150,000 for the month.
(b)
Using the discount price found in part (a), calculate the break‑even point in units – i.e., the minimum number of discounted units that must be sold in addition to the 300 units already sold at the higher price – for the trader to cover all costs.
(c)
Discuss two non‑financial factors that could influence the trader’s decision to adopt the discount price, and suggest one practical strategy to mitigate each factor.
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Question 4 View Details
A Nigerian importer plans to import 10,000 units of an electronic component from China. The invoice price is US$4 per unit. The current exchange rate is ₦460 per US$. The importer must pay a 5% import duty, a 2% surtax on the duty, and a 1% customs processing fee on the total CIF value. Shipping and insurance cost amount to US$0.30 per unit, payable in dollars. The importer wants to set a selling price in naira that yields a gross margin of 25% on the total landed cost.
Question Parts
(a)
Calculate the total landed cost per unit in naira, showing all steps.
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Question 5 View Details
A retailer sells a model of mobile phone. The current selling price is ₦20,000 per unit. The variable cost (including purchase price, packaging and sales commission) is ₦12,000 per unit and the monthly fixed overheads (rent, salaries, utilities) amount to ₦240,000. The retailer expects to sell 30 units each month.
Question Parts
(a)
Calculate the break‑even quantity for the retailer under the current price and cost structure.
(b)
The retailer is considering a 10 % increase in the selling price while a new supplier would raise the variable cost by 5 %. Determine the new break‑even quantity.
(c)
Assuming the retailer continues to sell the originally forecast 30 units per month, compare the monthly profit under the original and the new price‑cost structure.
(d)
Based on your calculations, recommend a pricing strategy for the retailer and justify your recommendation.
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Question 6 View Details
A wholesaler purchases a generic electronic component from a manufacturer at a base cost of ₦5,000 per unit. The manufacturer offers quantity discounts as follows: 0–99 units – no discount; 100–199 units – 5 % discount; 200 units and above – 10 % discount. The wholesaler incurs a fixed handling cost of ₦30,000 for each order placed. The wholesaler intends to sell the component to retailers with a markup of 30 % on the purchase cost after any discount.
Question Parts
(a)
If the wholesaler orders 150 units for the month, calculate the total cost incurred (including purchase cost after discount and handling cost).
(b)
Determine the selling price per unit that the wholesaler should charge to achieve the 30 % markup on the discounted purchase cost.
(c)
Calculate the wholesaler’s monthly profit when 150 units are sold at the price found in part (b).
(d)
If the wholesaler increases the order size to 250 units to obtain the 10 % discount, assuming the same 30 % markup and that demand can be met, calculate the new monthly profit and comment on the effect of economies of scale.
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Question 7 View Details
A group of three entrepreneurs intend to start a manufacturing business that will produce household appliances. They are considering whether to register the business as a partnership or as a private limited company.
Question Parts
(a)
Define the key characteristics of a partnership and of a private limited company.
(b)
Discuss three advantages and three disadvantages of each form of organisation for a start‑up manufacturing firm.
(c)
The partners project a profit before tax of ₦2,400,000 for the first year. They agree to retain 10 % of this profit for future investment and to distribute the remaining profit in the ratio of the capital each partner contributes: Partner A – ₦800,000, Partner B – ₦500,000, Partner C – ₦300,000. In a partnership each partner pays personal income tax at 20 % on his/her share of profit. Calculate: i. The amount retained by the partnership. ii. The profit share of each partner before tax. iii. The tax payable by each partner. iv. The net profit each partner receives after tax.
(d)
Based on the calculations in part (c) and the discussion in parts (a) and (b), recommend which form of business organisation is most appropriate for the start‑up and justify your recommendation.
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Question 8 View Details
A manufacturing firm wishes to raise ₦10,000,000 to purchase new equipment for an expansion project.
Question Parts
(a)
Explain the difference between internal and external sources of finance, giving two examples of each.
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Question 9 View Details
A customer, Mrs. Ade, is considering two investment options offered by her bank: 1. A Fixed‑Deposit (FD) scheme that pays 6 % p.a. compound interest for the first 18 months and then 7 % p.a. compound interest for the remaining period. 2. A 3‑year Government Bond that pays a flat 6.5 % p.a. compound interest. Mrs. Ade intends to invest ₦500 000 in either option and is concerned about the impact of inflation, which is projected to average 4 % per year over the next three years. Answer the following questions:
Question Parts
(a)
Calculate the amount Mrs. Ade will receive at the end of the 3‑year period if she chooses the Fixed‑Deposit scheme. Show all steps.
(b)
Determine the effective annual compound rate (EAR) that would give the same final amount as the Fixed‑Deposit scheme over the 3‑year period.
(c)
Compare the real returns (adjusted for inflation) of the Fixed‑Deposit and the Government Bond. Which investment provides a higher real return? Justify your answer with calculations.
(d)
Discuss two non‑financial factors that Mrs. Ade should consider before deciding between the Fixed‑Deposit and the Government Bond.
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Question 10 View Details
A motor insurance company offers a comprehensive policy with the following features: - Annual premium: ₦120 000. - Deductible (excess) per claim: ₦15 000. - No‑Claim Bonus (NCB) discount: 5 % reduction in premium for each claim‑free year, up to a maximum of 25 %. - Probability of a claim in any given year for a typical policyholder: 0.08. - Average cost of a claim (before deductible) for the company: ₦250 000. Assume the policyholder, Mr. Bello, has been claim‑free for the past two years. Answer the following:
Question Parts
(a)
Calculate the expected annual cost to Mr. Bello (including premium, NCB discount, and expected out‑of‑pocket expense) for the upcoming policy year.
(b)
If the company raises the deductible to ₦30 000 while keeping the premium unchanged, determine the new expected annual cost to Mr. Bello and comment on how the change affects his expected out‑of‑pocket expense and the insurer’s risk exposure.
(c)
Assuming Mr. Bello remains claim‑free for the next three consecutive years, calculate the premium he would pay in the fourth year, showing the effect of the maximum NCB discount.
(d)
Critically evaluate the fairness of using a deductible and NCB system from both the insurer’s and the policyholder’s perspectives.
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