neco 2020 commerce | Essay

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Question 1 View Details
Commerce is the engine of economic activity in any country. Answer the following questions.
Question Parts
(a)
Define commerce in your own words.
(b)
State the three main functions of commerce and explain each function.
(c)
Give a practical example from the Nigerian economy for each of the three functions mentioned in part (b).
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Question 2 View Details
The table below shows selected trade data for Nigeria in a recent year. - Export price of cocoa: $2.10 per kilogram - Import price of wheat: $0.45 per kilogram - Total export revenue from cocoa: ₦210,000,000 - Total import expenditure on wheat: ₦81,000,000 - Exchange rate: ₦410 = $1 Using this information, answer the following questions.
Question Parts
(a)
Calculate the quantity of cocoa exported and wheat imported, expressing your answers in tonnes (1 tonne = 1,000 kg).
(b)
Determine Nigeria's trade balance for these two commodities and state whether it is a surplus or a deficit.
(c)
If the government imposes a 10 % export tax on the revenue from cocoa, recalculate the trade balance.
(d)
Discuss two possible economic effects of the export tax on the Nigerian economy.
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Question 3 View Details
A small retail shop sells a popular brand of mobile phone. The cost price (including freight) of each phone is \(\$150\). The shop normally marks up the phones by 40% on the cost price. However, to boost sales during the festive season, the shop offers a discount of 10% on the marked price and must also pay a value‑added tax (VAT) of 5% on the selling price after discount. The shop incurs a fixed monthly overhead of \(\$2,500\).
Question Parts
(a)
Calculate the selling price per phone after applying the discount and adding VAT.
(b)
If the shop sells 120 phones in the month, compute the total profit earned (profit = total revenue – total cost – overhead).
(c)
Discuss how a further 5% increase in the discount (making it 15% total) would affect the shop’s profit, assuming the same sales volume of 120 phones. State at least two possible outcomes for the shop’s decision‑making.
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Question 4 View Details
A Nigerian importer wishes to bring in 10,000 kilograms of cocoa beans from Ghana. The agreed FOB (Free on Board) price in Ghana is \(\$2.20\) per kilogram. The current exchange rate is \(\$1 = ₦460\). The importer must pay a customs duty of 5% on the CIF (Cost, Insurance and Freight) value, a levy of 2% on the same CIF value, and a 10% import VAT on the total of CIF plus duties and levy. Insurance is quoted at 0.5% of the FOB value, and freight from the Ghanaian port to Lagos port is \$0.30 per kilogram. The importer also incurs a fixed clearing and handling charge of ₦12,500.
Question Parts
(a)
Determine the CIF value in Nigerian Naira.
(b)
Calculate the total amount of customs duty, levy, and import VAT payable in Naira.
(c)
Find the total landed cost per kilogram of cocoa beans (including all charges and the fixed clearing fee spread over the shipment).
(d)
Discuss two possible effects on the importer’s profitability if the exchange rate depreciates to \(\$1 = ₦500\) while all other terms remain unchanged.
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Question 5 View Details
A retail shop sells three products – Product X, Product Y and Product Z. The following information is available for the most recent month:
Question Parts
(a)
Calculate the gross profit earned on each product. Use the formula Gross Profit = (Selling Price – Cost Price) × Quantity Sold.
(b)
Determine the markup percentage for each product. Markup % = (Gross Profit ÷ Cost Price) × 100.
(c)
Based on the results above, advise the shop owner which product should be promoted more aggressively and justify your recommendation with reference to profitability and inventory turnover (given that the stock turnover ratios are: X = 4, Y = 6, Z = 3).
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Question 6 View Details
A wholesale dealer purchases a batch of 5,000 units of a popular electronic gadget from a manufacturer. The following terms apply:
Question Parts
(a)
If the manufacturer offers a 10% trade discount on the list price of ₦2,500 per unit and a further 2% cash discount for payment within 10 days, calculate the effective cost per unit when the dealer pays within the discount period.
(b)
The dealer incurs fixed monthly overheads of ₦150,000 and wishes to achieve a profit margin of 20% on the effective cost calculated in part (a). Determine the minimum selling price per unit required to meet this target.
(c)
If the dealer decides to extend credit to retailers for 30 days with no additional discount, discuss qualitatively how this decision will affect cash flow and the break‑even point, assuming all other conditions remain unchanged.
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Question 7 View Details
XYZ Traders is a family‑owned business that started as a sole proprietorship. After five years of operation, the owners are considering converting the business first into a partnership and later into a private limited liability company (Ltd).
Question Parts
(a)
Explain the key differences between a sole proprietorship, a partnership and a private limited liability company in terms of: (i) liability of owners, (ii) ownership and management structure, (iii) tax treatment.
(b)
Using the scenario, discuss two advantages and two disadvantages of converting XYZ Traders from a sole proprietorship to a partnership.
(c)
The owners are concerned about raising capital for expansion. Compare the potential of a partnership versus a private limited liability company for raising long‑term finance, citing at least three sources of finance available to each form and the implications for control of the business.
(d)
Recommend the most suitable form of organization for XYZ Traders at this stage, justifying your recommendation with reference to liability, capital needs and continuity.
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Question 8 View Details
ABC Manufacturing Ltd plans to purchase new machinery that costs ₦12,000,000. The firm is evaluating four possible sources of finance: (i) a 5‑year bank loan at 12% per annum payable annually, (ii) issuing 10% debentures with a face value of ₦1,000 each, (iii) leasing the machinery on a 5‑year lease with annual payments of ₦3,200,000, and (iv) retaining earnings of ₦2,500,000.
Question Parts
(a)
Calculate the total amount of interest payable over the life of the bank loan and the total amount that will be repaid at the end of the 5‑year period.
(b)
If the debentures are issued at a discount of 5% on face value, determine (i) the net proceeds received by the company and (ii) the annual interest expense on the debentures.
(c)
Compute the effective annual cost of the lease (ignore tax) and compare it with the average annual cost of the bank loan (interest only) and the debenture interest.
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