neco 2019 commerce | Essay

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Question 1 View Details
Commerce is the activity that links producers and consumers through the exchange of goods and services. Using this context, answer the following:
Question Parts
(a)
Define commerce and explain its three main functions.
(b)
Distinguish between 'trade' and 'commerce' and give two examples of each.
(c)
Discuss how modern technology has transformed one of the functions of commerce, citing specific examples.
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Question 2 View Details
Country X imports 3,000 tonnes of wheat at $200 per tonne and exports 2,000 tonnes of cocoa at $250 per tonne. The exchange rate is ₦500 per $1. The government imposes a 5% tariff on wheat imports, a 10% export tax on cocoa, and gives a subsidy of ₦10,000 for each tonne of wheat imported to support local processing.
Question Parts
(a)
Calculate the total value in naira of the wheat imports (i) before any tariff or subsidy, (ii) after adding the 5% tariff, and (iii) after applying the subsidy.
(b)
Calculate the total value in naira of the cocoa exports after the 10% export tax.
(c)
Determine the trade balance (exports minus imports) in naira after accounting for the tariff, tax and subsidy.
(d)
If the government wishes to achieve a trade surplus of at least ₦1,000,000, suggest one non‑tax policy measure that could be adopted and briefly justify how it would improve the trade balance.
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Question 3 View Details
A small retailer purchases a batch of 500 units of a product at a total cost of ₦250,000. The retailer intends to sell the product in the local market and must decide on a pricing strategy that covers costs, allows for a desired profit margin, and remains competitive. The retailer expects that 20% of the units will be sold at a promotional discount of 10% off the regular selling price, while the remaining units will be sold at the regular price.
Question Parts
(a)
Calculate the regular selling price per unit that will give the retailer a profit margin of 25% on the total cost of the batch, ignoring the effect of the promotional discount.
(b)
Based on the regular price found in (a), determine the overall average selling price per unit after applying the 10% discount to the 20% of units sold at promotion.
(c)
Assess whether the retailer will achieve the intended 25% profit margin after the promotional discount is applied. Show your calculation and state the actual profit margin percentage.
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Question 4 View Details
A Nigerian importer plans to import 10,000 units of a consumer gadget. The supplier quotes an FOB price of $2 per unit. Shipping costs $0.30 per unit and insurance costs $0.05 per unit. The prevailing exchange rate is $1 = ₦750. Import duty is 5% ad valorem on the CIF value, a surtax of 2% is charged on the duty, and a levy of 0.5% is imposed on the total landed cost. The importer wishes to set a selling price that yields a 30% profit margin on the total landed cost.
Question Parts
(a)
Calculate the total landed cost in Naira for the entire shipment.
(b)
Determine the unit selling price in Naira that will give the importer a 30% profit margin on the total landed cost calculated in (a).
(c)
Assume the Naira depreciates to $1 = ₦825 while the foreign costs (FOB, freight, insurance) remain unchanged. If the importer keeps the unit selling price found in (b) unchanged, calculate the new profit margin percentage.
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Question 5 View Details
A retailer sells two types of electronic accessories: headphones and power banks. The retailer purchases headphones at a cost price of \(\₦2,500\) each and power banks at \(\₦3,200\) each. The selling price per unit is \(\₦3,800\) for headphones and \(\₦4,500\) for power banks. Fixed monthly overheads (rent, salaries, utilities) amount to \(\₦420,000\). In order to boost sales, the retailer offers a 10% discount on the selling price of headphones for customers who buy at least 5 headphones in a single transaction. The retailer expects to sell 200 headphones and 150 power banks each month without the discount.\n\nAnswer the following:
Question Parts
(a)
Calculate the monthly contribution margin per unit for headphones and power banks.
(b)
Determine the break‑even quantity of headphones (without discount) and power banks for the month.
(c)
If the retailer implements the 10% discount on headphones for bulk purchases of at least 5 units, evaluate the effect on: i) the contribution margin per discounted headphone, ii) the new break‑even quantity for headphones, assuming the same fixed costs. State whether the discount policy is advisable based on the break‑even analysis.
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Question 6 View Details
A wholesaler imports bulk quantities of bottled drinking water from three different suppliers (A, B and C). The details are as follows:\n\n- Supplier A offers a unit price of \(\₦120\) with a 30‑day credit period and a 2% cash discount if payment is made within 10 days.\n- Supplier B charges \(\₦115\) per unit but requires full cash payment on delivery (no credit).\n- Supplier C provides a unit price of \(\₦118\) with a 60‑day credit period but imposes a 1.5% surcharge on the invoice if payment is delayed beyond 45 days.\n\nThe wholesaler needs to purchase 10,000 units each month and aims to minimise the effective cost while maintaining adequate cash flow. Assume the wholesaler's annual cost of capital is 12% (i.e., a monthly cost of capital of 1%).\n\nAnswer the following:
Question Parts
(a)
Calculate the effective monthly cost per unit for each supplier, taking into account the cost of capital for the credit periods and any cash discounts or surcharges.
(b)
Based on the effective costs calculated in part (a), recommend the supplier the wholesaler should use if the wholesaler can afford to pay cash immediately for the entire order each month.
(c)
If the wholesaler prefers to preserve cash and therefore wants to use credit, which supplier should be selected? Justify your choice using the effective cost figures.
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Question 7 View Details
Three friends, Ada, Bayo and Chidi, plan to start a business together. Their proposed capital contributions are 40%, 35% and 25% respectively of the total start‑up capital. They are debating whether to register the business as a partnership or as a private limited company (Ltd). The projected net profit for the first year is ₦1,200,000.
Question Parts
(a)
Explain the key differences between a partnership and a private limited company with respect to (i) liability of owners, (ii) management structure, and (iii) continuity of existence.
(b)
Considering the three friends’ objectives, discuss which form of business organisation would be more suitable for each of the following considerations:
() Need for limited liability.
() Desire to raise external finance.
() Ease of decision‑making.
(c)
If the business is formed as a partnership, calculate each partner’s share of the ₦1,200,000 profit. If it is formed as a private limited company, the company will retain 30% of profit as reserves and distribute the remaining profit as dividends in proportion to the capital contributions. Calculate the dividend each shareholder will receive.
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Question 8 View Details
A manufacturing firm requires ₦15,000,000 to expand its production capacity. The firm is evaluating three sources of finance:
Question Parts
(a)
Long‑term bank loan: interest rate 12% per annum, payable annually. The loan can be obtained for the full amount needed.
(b)
Issuing 10% debentures with a face value of ₦5,000 each. Debentures are interest‑bearing securities payable annually.
(c)
Equity financing by issuing new ordinary shares at ₦2,500 each. The firm expects to pay a dividend yield of 8% on the market value of the shares.
(d)
The expansion is projected to generate an additional profit of ₦3,000,000 per year. For each financing option, evaluate:
() Cost comparison.
() Risk assessment.
() Effect on control.
() Break‑even profit requirement.
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