Gce Model Questions Vol1 2022 Commerce Question 2

Practice essay / theory question 2 from the 2022 Gce Model Questions Vol1 Commerce examination. This question covers Trade .

Gce Model Questions Vol1 2022 Commerce Essay / Theory
Topic: Trade
Question 2 GCE_MODEL_QUESTIONS_VOL1 • 2022 • COMMERCE • essay

A Nigerian cocoa exporter, CocoaCo Ltd, sells raw cocoa beans to an overseas buyer. The agreed FOB price is US$2,500 per metric tonne. The current exchange rate is ₦820 per US$. The exporter incurs the following additional costs per tonne: inland transport to the port ₦120,000, loading and handling at the port ₦80,000, and export insurance ₦50,000. A tariff of 5% is imposed by the importing country on the CIF value (FOB price plus freight of US$200 per tonne, converted at the same exchange rate).

Question Parts

( a )
Calculate the total cost in naira incurred by CocoaCo per tonne, including all listed costs and the tariff payable by the buyer. Show all steps.
( b )
If CocoaCo wishes to earn a profit margin of 12% on the total cost (excluding the tariff), determine the minimum selling price in naira per tonne that the exporter should quote to the buyer (FOB price). Assume the buyer will pay the tariff in addition to the FOB price.
( c )
Discuss two potential risks associated with exchange‑rate fluctuations for CocoaCo and suggest one mitigation strategy for each risk.

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About This Question

This is Gce Model Questions Vol1 2022 Commerce Question 2. It is one of the essay questions from the 2022 Gce Model Questions Vol1 Commerce examination.

The question covers Trade .

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