Practice gce model questions vol1 commerce 2023 Past Questions

Question 1 View Details

A supplier quotes a marked price of $\₦500{,}000$ for a batch of goods. The supplier offers a trade discount of 10% on the marked price and, if payment is made within 30 days, an additional cash discount of 3% on the amount after the trade discount. After these discounts, a VAT of 7.5% is added to the discounted amount. The buyer pays the final amount; the amount before VAT is taken as the buyer's cost price. The buyer wishes to achieve a profit margin of 18% on this cost price. If the batch contains 2,500 units, what selling price per unit (excluding VAT) should the buyer set to obtain the desired profit margin?

A. ₦198.45 per unit (excluding VAT)

B. ₦212.60 per unit (excluding VAT)

Correct C. ₦206.03 per unit (excluding VAT)

D. ₦219.99 per unit (excluding VAT)

Correct Answer: C

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Question 2 View Details

An insurance company calculates a motor‑insurance premium as follows:\n\n- Base premium = 4% of the sum insured.\n- A loading of 25% is added for a young driver.\n- A no‑claims discount of 15% is then applied to the loaded premium.\n- Finally, a government tax of 5% is added to the discounted premium.\n\nIf the sum insured is $\₦2{,}000{,}000$, what is the final premium payable?\n\nFurthermore, if the policyholder wishes the final premium not to exceed $\₦120{,}000$, what is the maximum sum insured they could choose, assuming the same percentages apply?

A. Final premium = ₦90,750; maximum sum insured ≈ ₦2,720,500

Correct B. Final premium = ₦89,250; maximum sum insured ≈ ₦2,689,075

C. Final premium = ₦85,000; maximum sum insured ≈ ₦2,600,000

D. Final premium = ₦92,500; maximum sum insured ≈ ₦2,750,000

Correct Answer: B

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Question 3 View Details

A homeowner purchases 15 floor tiles at $\₦2{,}500$ each and 8 bags of cement at $\₦3{,}200$ each. The supplier offers a flat discount of $\₦5{,}000$ on the total purchase if the total exceeds $\₦50{,}000$. After any discount, a sales tax of 5% is added. What is the final amount the homeowner must pay?

A. ₦61,255

B. ₦62,942

Correct C. ₦61,005

D. ₦66,255

Correct Answer: C

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Question 4 View Details

A consumer buys a washing machine for $\₦120{,}000$. After 18 months the machine fails. Under consumer‑protection law the consumer can choose one of three remedies:\n\n1. Repair at a cost of $\₦8{,}000$.\n2. Replacement with a new model that costs 10% more than the original price.\n3. A refund of the purchase price minus a restocking fee of 5% of the original price.\n\nFor each option, state the net amount the consumer will have to pay (or receive) and identify which option is cheapest for the consumer.

A. Repair option; consumer pays ₦8,000 (cheapest)

Correct B. Refund option; consumer receives ₦114,000 (cheapest)

C. Replacement option; consumer pays ₦12,000 (cheapest)

D. Refund option; consumer receives ₦108,000 (cheapest)

Correct Answer: B

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Question 5 View Details

A small business needs $\₦5{,}000{,}000$ for expansion. It can raise the funds in one of two ways:\n\n- Bank loan: interest rate 12% per annum, interest payable annually, principal repaid in full at the end of 5 years.\n- Preference shares: dividend rate 10% per annum, payable annually, shares redeemable at par after 5 years.\n\nThe expansion is expected to generate an additional profit of $\₦800{,}000$ each year. Which source of finance gives the higher net annual cash flow after financing costs? Also state the net cash flow per year for each option (ignore the final principal repayment or redemption).

Correct A. Preference shares; net cash flow = ₦300,000 per year (vs ₦200,000 for loan)

B. Preference shares; net cash flow = ₦250,000 per year (vs ₦150,000 for loan)

C. Preference shares; net cash flow = ₦200,000 per year (vs ₦100,000 for loan)

D. Bank loan; net cash flow = ₦350,000 per year (vs ₦250,000 for loan)

Correct Answer: A

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Question 6 View Details

A company quotes a marked price of $\text{₦}12{,}500$ per unit. It offers a first discount of 12 % on the marked price, followed by a further discount of 5 % on the reduced price. After the discounts, a sales tax of 7.5 % is added. If the buyer pays within 10 days, a cash discount of 2 % is applied to the amount inclusive of tax. The company also provides a free service valued at $\text{₦}3{,}200$, whose cost to the company is $\text{₦}1{,}500$. The cost price per unit for the company is $\text{₦}9{,}200$. Calculate the effective profit margin (profit as a percentage of the final cash price) to two decimal places.

A. 3.00

Correct B. 2.83

C. 3.12

D. 2.45

Correct Answer: B

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Question 7 View Details

A shop sells three items. Item A costs $\text{₦}1{,}250$ each and 40 units are sold per month. Item B costs $\text{₦}2{,}800$ each and 15 units are sold per month. Item C costs $\text{₦}950$ each and 60 units are sold per month. What is the shop's total monthly turnover?

Correct A. 149000

B. 148500

C. 147800

D. 150250

Correct Answer: A

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Question 8 View Details

A trader needs to purchase US $3{,}500. The bank's quoted buying rate is $\text{₦}415$ per US $. The bank charges a commission of 1.2 % on the Naira amount. How many Naira does the trader pay in total?

Correct A. 1469930

B. 1452500

C. 1626800

D. 1470140

Correct Answer: A

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Question 9 View Details

An insurance company calculates a pure premium of $\text{₦}18{,}500$ per year for a motor policy. It adds a loading factor of 25 % to cover expenses and profit. The policy includes a deductible of $\text{₦}2{,}000$ per claim. In a year the insured vehicle makes two claims, each with a loss of $\text{₦}7{,}800$ before deductible. Determine the insurer's net profit (or loss) for that policy for the year.

A. 10600

B. 6900

C. 7525

Correct D. 11525

Correct Answer: D

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Question 10 View Details

A home baker has fixed monthly overheads of $\text{₦}45{,}000$. The variable cost per cake is $\text{₦}4{,}500$. Each cake sells for $\text{₦}9{,}200$. For any order of 5 or more cakes a discount of 10 % is applied to the total order price. In a month the baker receives two orders: one for 4 cakes and another for 6 cakes. Calculate the baker's total profit (or loss) for the month.

A. -4520

Correct B. -3520

C. -352

D. 3520

Correct Answer: B

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Question 11 View Details

An insurance company calculates the motor‑vehicle premium as follows: (i) (5\%\) of the insured value is the base premium; (ii) a loading of (20\%\) is added for high‑risk drivers; (iii) a government tax of (8\%\) is applied on the loaded premium; (iv) an early‑payment discount of (5\%\) is given on the total after tax. If the final premium paid by a customer is $\text{₦}48\,000$, what is the insured value of the vehicle (in naira, rounded to the nearest naira)?

A. ₦187,128

B. ₦842,105

C. ₦740,741

Correct D. ₦779,750

Correct Answer: D

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Question 12 View Details

A company runs an advertising campaign using three media: TV, radio and internet. TV reaches 40\% of the target market, radio reaches 30\% and internet reaches 25\%. Surveys show that 12\% see both TV and radio, 8\% see both TV and internet, 5\% see both radio and internet, and 3\% see all three media. What percentage of the target market sees exactly one of the three media?

A. 46\%

B. 50\%

Correct C. 54\%

D. 58\%

Correct Answer: C

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Question 13 View Details

A retailer purchases 500 units of a product for a total cost of $\text{₦}120\,000$. He adds a markup of 30\% on the cost price per unit to set the selling price. For bulk orders of 100 units or more he offers a discount of 10\% on the selling price. Fixed overheads for the month are $\text{₦}15\,000$. Assuming all sales are bulk orders, how many units must be sold to achieve a profit of $\text{₦}20\,000$ after covering overheads?

A. 950

B. 820

Correct C. 858

D. 900

Correct Answer: C

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Question 14 View Details

A company wishes to import 10,000 units of a component. Supplier A quotes US\$4 per unit, payable in dollars. Supplier B quotes €3.5 per unit, payable in euros. The exchange rates are 1 USD = $\text{₦}380$ and 1 EUR = $\text{₦}420$. Insurance and freight add a flat $\text{₦}150$ per unit for both suppliers. An import tariff of 12\% is applied to the CIF value (price + insurance + freight) after conversion to naira. Which supplier offers the lower total cost per unit in naira, and what is that cost (to two decimal places)?

Correct A. Supplier B, ₦1,814.40

B. Supplier A, ₦1,814.40

C. Supplier B, ₦1,900.00

D. Supplier A, ₦1,850.00

Correct Answer: A

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Question 15 View Details

A firm can raise capital from two sources only: a bank loan and issuing new shares. The after‑tax cost of the bank loan is 9\% (the loan interest rate is 12\% and the corporate tax rate is 25\%). The cost of new equity is 15\%. The firm wants an overall cost of capital of 10\%. What proportion of the total financing should be obtained from the bank loan (expressed as a percentage, rounded to one decimal place)?

A. 66.7\%

B. 75.0\%

C. 90.0\%

Correct D. 83.3\%

Correct Answer: D

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Question 16 View Details

A trader engages in the following transactions on the stock exchange during a year. - Company A: buys $500$ shares at $\text{₦}120$ each, later buys $300$ shares at $\text{₦}130$ each, and sells $400$ shares at $\text{₦}150$ each. - Company B: buys $200$ shares at $\text{₦}80$ each, later buys $100$ shares at $\text{₦}85$ each, and sells $150$ shares at $\text{₦}95$ each. Using the average‑cost method for each company, calculate the trader's overall profit (or loss) for the year and express it as a percentage return on the total amount invested. During the same period the main stock index rose by $12\%$. Did the trader's portfolio outperform the index? Answer "Yes, outperformed by X %" or "No, underperformed by Y %" (rounded to one decimal place).

A. No, underperformed by 0.5 %

Correct B. No, underperformed by 1.9 %

C. Yes, outperformed by 2.3 %

D. No, underperformed by 3.1 %

Correct Answer: B

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Question 17 View Details

Company X announces a 3‑for‑1 share split and a cash dividend of $\text{₦}2$ per share. An investor holds $150$ shares bought at $\text{₦}250$ each. The market price before the dividend is $\text{₦}250$. After the dividend the share price falls by the dividend amount, then the split is applied. Following the split the share price increases by $5\%$ due to market reaction. Determine the investor's total value (share value plus cash dividend) after these events and state the overall percentage gain or loss on the original investment, rounded to the nearest whole percent.

A. 7 % loss

B. 5 % loss

C. 3 % gain

Correct D. 5 % gain

Correct Answer: D

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Question 18 View Details

A trader imports $200$ units of a product at a unit cost of $\text{₦}1,500$. Insurance is charged at $2\%$ of the cost, freight at $8\%$ of the CIF value (cost + insurance), and an import duty of $12\%$ of the CIF value. Calculate the total landed cost of the shipment.

A. ₦366,480

B. ₦330,480

Correct C. ₦367,200

D. ₦367,320

Correct Answer: C

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Question 19 View Details

A logistics company operates trucks with a fixed daily cost of $\text{₦}50,000$ and a variable cost of $\text{₦}30$ per kilometre. Each truck can carry a maximum of $20$ tonnes. The company must transport $150$ tonnes over a distance of $400$ km. Assuming the company makes the minimum number of trips needed and all trips are completed in one day, what is the minimum freight charge per tonne per kilometre that will allow the company to break even? Give your answer in $\text{₦}$ per tonne‑km, rounded to two decimal places.

A. ₦1.60 per tonne‑km

Correct B. ₦2.43 per tonne‑km

C. ₦2.45 per tonne‑km

D. ₦2.23 per tonne‑km

Correct Answer: B

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Question 20 View Details

A consumer purchases a washing machine for $\text{₦}120,000$ with a 2‑year warranty. The seller's warranty clause states that any repair claim within the warranty period incurs a fixed service charge of $\text{₦}15,000$ plus a surcharge of $20\%$ on the cost of any parts used. The machine develops a fault that requires replacement of a part costing $\text{₦}8,000$. Calculate the total amount the consumer must pay under the clause and state whether the clause is likely to be considered unfair under consumer‑protection rules that deem a charge unfair if it exceeds the consumer's actual loss by more than $50\%$.

A. Consumer must pay ₦16,600; the clause is fair

B. Consumer must pay ₦17,200; the clause is unfair

C. Consumer must pay ₦15,800; the clause is unfair

Correct D. Consumer must pay ₦16,600; the clause is unfair

Correct Answer: D

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Question 21 View Details

A wholesaler purchases a product at a unit cost of $\text{₦}200$. The annual demand is $12{,}000$ units. The ordering cost per order is $\text{₦}500$ and the holding cost is $20\%$ of the unit cost per year. The warehouse can hold at most $1{,}500$ units at any time. The supplier offers a quantity discount: if the order quantity is $1{,}000$ units or more, the unit cost falls to $\text{₦}180$. Determine the order quantity that minimises the total annual cost and state that minimum cost.

A. Order quantity = 1,000 units; Minimum total annual cost = ₦2,250,000

B. Order quantity = 1,200 units; Minimum total annual cost = ₦2,160,000

Correct C. Order quantity = 1,000 units; Minimum total annual cost = ₦2,184,000

D. Order quantity = 548 units; Minimum total annual cost = ₦2,200,000

Correct Answer: C

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Question 22 View Details

A wholesaler buys a product at a cost price of $\text{₦}8{,}500$ per unit. He offers retailers a trade discount of $12\%$ on the list price, then pays a sales‑agent commission of $5\%$ on the discounted price, and finally adds VAT of $7.5\%$ on the price after commission. The wholesaler wants a profit margin of $20\%$ on his cost after all deductions. What should be the list price he sets?

Correct A. ₦11,039

B. ₦12,000

C. ₦10,500

D. ₦11,500

Correct Answer: A

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Question 23 View Details

A 5‑year corporate bond with a face value of $\text{₦}100{,}000$ pays an annual coupon of $8\%$ (paid annually). The bond is currently priced at $\text{₦}92{,}000$. An investor is also considering buying shares that pay a dividend of $\text{₦}6{,}000$ per year, with an expected price growth of $4\%$ per year. The current share price is $\text{₦}120{,}000$. The investor's marginal tax rate is $25\%$ on interest income and $15\%$ on dividend income. Using the approximate yield‑to‑maturity formula for the bond, determine the after‑tax annual return (as a percentage) for both the bond and the share, and state which investment gives the higher after‑tax return.

A. Bond after‑tax return ≈ 6.80 %; Share after‑tax return ≈ 8.25 %; the share gives the higher return.

B. Bond after‑tax return ≈ 7.54 %; Share after‑tax return ≈ 7.90 %; the bond gives the higher return.

C. Bond after‑tax return ≈ 8.10 %; Share after‑tax return ≈ 7.80 %; the bond gives the higher return.

Correct D. Bond after‑tax return ≈ 7.54 %; Share after‑tax return ≈ 8.25 %; the share gives the higher return.

Correct Answer: D

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Question 24 View Details

A company needs $\text{₦}5{,}000{,}000$ for expansion. It can either (A) obtain a 5‑year bank loan at 12 % per annum (interest payable annually) with a one‑time arrangement fee of 2 % of the loan amount, or (B) issue 5‑year debentures at 10 % per annum (interest payable annually) with flotation costs of 3 % of the issue amount. The corporate tax rate is 30 %. Assuming the fees are amortised evenly over the 5‑year period, which source of finance has the lower after‑tax annual cost and what is that cost (as a percentage of the amount raised)?

A. Bank loan; after‑tax annual cost = 8.8 % (₦440,000 per year)

B. Debentures; after‑tax annual cost = 8.0 % (₦400,000 per year)

Correct C. Debentures; after‑tax annual cost = 7.6 % (₦380,000 per year)

D. Bank loan; after‑tax annual cost = 7.6 % (₦380,000 per year)

Correct Answer: C

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Question 25 View Details

A wholesaler sells product X at a current price of $\text{₦}1{,}200$ per unit. Variable cost per unit is $\text{₦}800$ and fixed costs are $\text{₦}300{,}000$ per year. Annual sales volume is 2,000 units. The wholesaler is considering a promotional discount of 10 % on the selling price. Market research indicates that for each 1 % discount, sales volume will increase by 5 % of the current volume. Should the wholesaler adopt the discount? If so, calculate the new annual profit.

A. No; new annual profit = ₦540,000

B. Yes; new annual profit = ₦480,000

C. Yes; new annual profit = ₦600,000

Correct D. Yes; new annual profit = ₦540,000

Correct Answer: D

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