Neco 2019 Commerce Question 4

Practice essay / theory question 4 from the 2019 Neco Commerce examination. This question covers Foreign Trade, Exchange Rate, Import Duty, Costing, Pricing .

Neco 2019 Commerce Essay / Theory

Topics: Foreign Trade Exchange Rate Import Duty Costing Pricing

Question 4 NECO • 2019 • COMMERCE • essay

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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About This Question

This is Neco 2019 Commerce Question 4. It is one of the essay questions from the 2019 Neco Commerce examination.

The question covers Foreign Trade, Exchange Rate, Import Duty, Costing, Pricing .

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