gce model questions vol1 2024 commerce | Essay

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Question 1 View Details
The Nigerian economy is increasingly driven by commercial activities. Answer the following questions based on this context.
Question Parts
(a)
Define commerce and clearly distinguish it from the term ‘trade’.
(b)
Explain three distinct ways in which commerce contributes to national development in Nigeria.
(c)
A small enterprise imports raw cocoa beans, processes them into chocolate, and sells the finished product locally. Discuss how each of the four main functions of commerce – transport, warehousing, banking and insurance – adds value to this business.
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Question 2 View Details
The table below shows Nigeria’s export and import data for two primary commodities – cocoa and rubber – for the years 2022 and 2023. | Commodity | Year | Quantity (tonnes) | Price per tonne (US$) | Value (US$ millions) | |-----------|------|-------------------|-----------------------|----------------------| | Cocoa (Export) | 2022 | 200,000 | 2,500 | 500 | | Cocoa (Export) | 2023 | 220,000 | 2,700 | 594 | | Rubber (Export) | 2022 | 150,000 | 1,800 | 270 | | Rubber (Export) | 2023 | 140,000 | 1,900 | 266 | | Cocoa (Import) | 2022 | 50,000 | 2,800 | 140 | | Cocoa (Import) | 2023 | 55,000 | 2,900 | 159.5 | | Rubber (Import) | 2022 | 120,000 | 2,000 | 240 | | Rubber (Import) | 2023 | 130,000 | 2,100 | 273 | Answer the following questions.
Question Parts
(a)
Calculate the percentage change in the export value of cocoa from 2022 to 2023. Show your working.
(b)
Determine Nigeria’s terms of trade for 2022 and for 2023 (using the ratio of total export value to total import value, expressed as a percentage). State whether the terms of trade have improved or deteriorated in 2023 and briefly explain why.
(c)
The government is considering a 10 % ad‑valorem tariff on imported rubber. Using the 2023 import quantity, calculate the new price per tonne of rubber after the tariff and the resulting total import value. Discuss two likely effects of this tariff on (i) Nigeria’s balance of trade and (ii) domestic consumer prices for rubber‑based products.
(d)
Based on your calculations and discussion, recommend whether Nigeria should pursue diversification of its export basket. Justify your recommendation with reference to the data.
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Question 3 View Details
A young entrepreneur runs a home‑based business selling handcrafted leather bags. Each bag costs ₦2,500 to purchase and incurs a variable cost of ₦500 for packaging and transport. Fixed monthly costs (storage rent, electricity, etc.) amount to ₦30,000. The entrepreneur wishes to earn a profit equal to 20 % of the total cost of producing the bags each month. She expects to sell 120 bags per month at the regular price and plans to offer a seasonal discount of 10 % on that price. Market research suggests that the discount will increase the quantity sold by 30 %.
Question Parts
(a)
Determine the regular selling price per bag that will give the required profit, assuming she sells 120 bags per month.
(b)
Calculate the new selling price after applying the 10 % discount.
(c)
Estimate the profit per month if the discount leads to a 30 % increase in the number of bags sold. Compare this profit with the profit obtained without the discount.
(d)
Discuss two advantages and two disadvantages of using such a discount strategy for a home‑based trader.
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Question 4 View Details
A Nigerian importer wishes to import 5,000 kg of cocoa beans from Ghana. The invoice price is US$2 per kilogram. The current exchange rate is ₦750 per US$1. Import duty is 5 % of the customs value and a surcharge of 2 % is also levied on the customs value. Freight costs amount to ₦150,000 and insurance is charged at 0.5 % of the CIF value. To guard against exchange‑rate fluctuations, the importer has entered a forward contract that fixes the rate at ₦770 per US$1 for payment due in three months. After three months the spot rate has moved to ₦800 per US$1.
Question Parts
(a)
Calculate the total landed cost in Naira if the importer pays using the forward rate.
(b)
Determine the effective cost per kilogram in Naira.
(c)
If the importer had paid at the spot rate after three months, compute the additional cost incurred because of the exchange‑rate movement.
(d)
Discuss two potential risks and two benefits of using forward contracts in foreign trade for Nigerian businesses.
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Question 5 View Details
A small retail shop sells two products, Product A and Product B. The shop purchases each unit of Product A at ₦1,200 and each unit of Product B at ₦800. The shop incurs monthly fixed overheads of ₦150,000 (rent, salaries, utilities). The shop sets the selling price of Product A at ₦1,800 per unit and Product B at ₦1,200 per unit. The shop also runs a promotion in the first month offering a 10 % discount on the selling price of Product A. The shop expects to sell 150 units of Product A and 200 units of Product B during that month. Answer the following:
Question Parts
(a)
Calculate the contribution margin per unit for Product A and Product B (selling price minus purchase cost).
(b)
Determine the break‑even number of units for each product if the shop sold only that product (i.e., fixed overheads are covered solely by the sales of the product).
(c)
During the promotional month the shop sells 150 units of Product A at the discounted price and 200 units of Product B at the normal price. Calculate the profit (or loss) for that month and state whether the promotion is financially advisable.
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Question 6 View Details
A wholesale distributor purchases a batch of 5,000 units of a consumer good at a purchase price of ₦500 per unit. The distributor pays a transport charge of ₦30,000 for the whole batch and incurs a monthly storage cost of ₦10 per unit for the month the goods are held. The distributor intends to sell the goods to retailers at a selling price of ₦800 per unit. Answer the following:
Question Parts
(a)
Calculate the total cost per unit (including purchase price, transport, and storage).
(b)
Determine the selling price per unit required to achieve a profit margin of 20 % on the total cost.
(c)
The distributor considers offering a 5 % cash‑discount to retailers who pay within 10 days, while the remaining retailers are given 30‑day credit with no discount. If 60 % of retailers take the cash‑discount, calculate the effective profit margin (percentage) on the whole batch.
(d)
Based on your calculations, advise whether the distributor should adopt the cash‑discount policy, considering both profitability and cash‑flow implications.
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Question 7 View Details
TechNova Ltd. is a newly incorporated private limited company in Nigeria with 25 employees. The company plans to expand its operations over the next three years.
Question Parts
(a)
Explain the key characteristics of a private limited company and how they differ from a partnership.
(b)
Discuss two advantages and two disadvantages of operating as a private limited company for TechNova Ltd.
(c)
The founders are considering converting the business into a public limited company to raise additional capital. Evaluate the legal and financial implications of such a conversion, and state two conditions that must be satisfied before the conversion can be effected.
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Question 8 View Details
EcoFarms Ltd. wants to purchase irrigation equipment costing ₦12,000,000. The equipment will increase annual net cash inflow by ₦3,200,000 for the next five years. The company can finance the purchase by (i) a bank loan at 12% per annum payable in equal annual installments, (ii) issuing 10% debentures with a five‑year maturity, or (iii) using retained earnings.
Question Parts
(a)
Calculate the total interest payable over the five‑year period if the company chooses the bank loan. (Assume straight‑line amortisation of principal.)
(b)
Determine the annual cost of capital for each of the three financing options (bank loan, debentures, retained earnings). For retained earnings, assume the opportunity cost of equity is 15%.
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Question 9 View Details
The 2023 annual report of Zenith Commercial Bank provides the following extracts (all figures in Nigerian Naira): Balance Sheet (selected items) - Total assets: 5,200,000,000 - Total liabilities: 4,800,000,000 - Shareholders’ equity (capital): 400,000,000 - Risk‑weighted assets: 3,500,000,000 Income Statement (selected items) - Interest income: 420,000,000 - Interest expense: 150,000,000 - Non‑interest income: 80,000,000 - Operating expenses (excluding interest): 200,000,000 - Loan‑loss provisions: 30,000,000 The Central Bank of Nigeria requires a minimum Capital Adequacy Ratio (CAR) of 8 %. Using the data above, answer the following.
Question Parts
(a)
Calculate the bank’s Net Interest Income (NII).
(b)
Determine the bank’s Return on Assets (ROA) for the year, expressed as a percentage to two decimal places. Use Net Profit before tax as the numerator, where Net Profit before tax = NII + Non‑interest income – Operating expenses – Loan‑loss provisions.
(c)
Compute the Capital Adequacy Ratio (CAR) and discuss how the result influences the bank’s capacity to expand its lending portfolio.
(d)
Suggest two realistic strategies the bank could adopt to improve its overall profitability without compromising regulatory capital requirements.
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Question 10 View Details
SecureLife Insurance offers a motor insurance policy to private vehicle owners. The following data relate to a homogeneous portfolio of 10,000 policies for the upcoming year (all figures in Nigerian Naira): - Current average premium charged per policy: ₦25,000 - Expected claim frequency per policy: 0.04 claims per year - Average cost per claim: ₦150,000 - Operating expenses are estimated at 20 % of total premium income. - The insurer wishes to include a profit loading equal to 10 % of the expected total claim cost. Using the information above, answer the questions that follow.
Question Parts
(a)
Calculate the expected total claim cost for the entire portfolio for the year.
(b)
Determine the minimum premium per policy that will cover the expected claim cost, operating expenses, and the required profit loading.
(c)
Explain briefly how the law of large numbers justifies the insurer’s ability to predict the total claims cost for this portfolio.
(d)
Identify two non‑financial factors that could affect SecureLife’s risk assessment for motor policies and briefly discuss their possible impact on premium setting.
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