Gce Model Questions Vol1 2021 Commerce Question 2

Practice essay / theory question 2 from the 2021 Gce Model Questions Vol1 Commerce examination. This question covers Trade, Import procedures, Exchange rate effects, Profit calculation .

Gce Model Questions Vol1 2021 Commerce Essay / Theory
Topics: Trade Import procedures Exchange rate effects Profit calculation
Question 2 GCE_MODEL_QUESTIONS_VOL1 • 2021 • COMMERCE • essay

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.

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 Gce Model Questions Vol1 2021 Commerce Question 2. It is one of the essay questions from the 2021 Gce Model Questions Vol1 Commerce examination.

The question covers Trade, Import procedures, Exchange rate effects, Profit calculation .

View More Gce Model Questions Vol1 2021 Commerce Questions More Gce 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