neco 2021 commerce | Essay

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Question 1 View Details
A small retail business sells three product categories: clothing, food items, and household goods.
Question Parts
(a)
Explain how commerce facilitates the movement of the three product categories from producers to consumers.
(b)
Identify two functions of money that are essential for the operation of this business and illustrate each with a short example.
(c)
Distinguish between wholesale and retail trade, giving one example of each from the business described.
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Question 2 View Details
Country X imports wheat and exports cocoa. In 2022 the country imported 120,000 tonnes of wheat at an average world price of $210 per tonne and exported 45,000 tonnes of cocoa at an average world price of $2,800 per tonne. The exchange rate is ₦560 per US$1. The government imposes a 5% tariff on wheat imports and grants a 10% export subsidy on cocoa.
Question Parts
(a)
Calculate the total value of wheat imports in Naira before the tariff is applied.
(b)
Determine the tariff revenue collected by the government from the wheat imports.
(c)
Compute the effective price per tonne of wheat paid by importers after the tariff, expressed in both Naira and US dollars.
(d)
Calculate the total earnings from cocoa exports after applying the 10% export subsidy, expressed in Naira.
(e)
Discuss qualitatively how the wheat tariff and cocoa export subsidy together affect the terms of trade for Country X.
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Question 3 View Details
A small retail shop purchases a batch of 500 units of a product at a total cost of ₦250,000. The shop intends to sell the product at a uniform selling price per unit. The owner plans the following pricing strategy: - Set a markup of 40% on the cost price per unit. - Offer a discount of 10% on the marked price to customers who buy 20 units or more in a single purchase. - Fixed monthly overhead expenses (rent, utilities, salaries) amount to ₦30,000. Assume that in a typical month the shop sells 350 units, of which 120 units are bought under the discount scheme. Answer the following:
Question Parts
(a)
Calculate the normal selling price per unit (before any discount).
(b)
Determine the selling price per unit for customers who purchase 20 units or more (i.e., after the discount).
(c)
Compute the shop's net profit for the month and state the break‑even quantity of units (the number of units that must be sold each month to cover all costs).
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Question 4 View Details
A Nigerian importer wishes to purchase a piece of machinery from a German supplier. The invoice price of the machinery is €45,000. The following additional costs apply: - Freight charges: €2,500 - Marine insurance (1.2% of the CIF value) - Import duty: 15% of the CIF value - Value‑added tax (VAT): 7.5% of (CIF value + import duty) The prevailing exchange rate is €1 = ₦560. Assume that the importer can obtain a 5% discount on the invoice price if the payment is made within 30 days. Answer the following questions: (a) Calculate the total cost of the machinery in Naira, assuming the discount is not taken. (b) Determine the total cost in Naira if the 5% early‑payment discount is availed. (c) Compute the effective rate of protection (ERP) on the machinery when the discount is not taken. Use the formula: ERP = [(Domestic value added – Imported value added) ÷ Imported value added] × 100%, where domestic value added = total cost – invoice price (in Naira) and imported value added = invoice price (in Naira). (d) Discuss briefly how a 5% depreciation of the Naira against the Euro would affect the total cost calculated in part (a).
Question Parts
(a)
Calculate the total cost of the machinery in Naira, assuming the discount is not taken.
(b)
Determine the total cost in Naira if the 5% early‑payment discount is availed.
(c)
Compute the effective rate of protection (ERP) on the machinery when the discount is not taken.
(d)
Discuss briefly how a 5% depreciation of the Naira against the Euro would affect the total cost calculated in part (a).
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Question 5 View Details
A retail shop sells two categories of goods. Category A consists of electronic items that cost ₦20,000 each. Category B consists of clothing items that cost ₦8,000 each. The shop applies a 30% markup on the cost of Category A and then offers a 10% discount on the marked price. For Category B the shop applies a 40% markup on the cost and offers a seasonal discount of 15% on the marked price. The shop incurs fixed monthly overheads of ₦150,000 and expects to sell 200 units of Category A and 300 units of Category B each month.
Question Parts
(a)
Determine the final selling price per unit of Category A after the markup and discount.
(b)
Determine the final selling price per unit of Category B after the markup and discount.
(c)
Using the selling prices obtained in (a) and (b): i. Calculate the total contribution (selling price minus cost) from each category for the expected monthly sales. ii. Calculate the number of units of each category that must be sold to cover the fixed overhead of ₦150,000 (break‑even).
(d)
Based on the contribution per unit, advise which category the retailer should prioritize if the aim is to maximise profit, assuming there is no limit on sales potential.
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Question 6 View Details
A wholesaler purchases a product from a manufacturer. The manufacturer’s list price is ₦13,500 per unit and offers a 12% trade discount on the list price. The wholesaler can obtain an additional 2% cash discount if payment is made within 10 days; otherwise the net amount is payable in 30 days. The wholesaler intends to sell the product to retailers with a 25% markup on the net purchase cost and offers retailers credit terms of 30 days with a 3% discount if payment is made within 15 days. Assume an annual simple interest rate of 12% for any cash‑flow timing considerations.
Question Parts
(a)
Calculate the net purchase cost per unit after the trade discount.
(b)
If the wholesaler takes the 2% cash discount, what is the effective cost per unit?
(c)
Determine the selling price per unit after applying the 25% markup on the net purchase cost (before any cash discount).
(d)
Compute the profit margin (percentage) for the wholesaler when the retailer: i. Pays within the 15‑day discount period. ii. Pays after 30 days (no discount).
(e)
Assuming the retailer takes the 3% discount, calculate the monetary value of the cash‑flow advantage to the wholesaler of receiving payment 15 days earlier (i.e., after 15 days instead of 30 days). Use the simple‑interest formula with the given 12% annual rate and comment on whether the discount is financially justified.
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Question 7 View Details
A group of three friends intends to start a small manufacturing enterprise that will produce biodegradable packaging materials. They anticipate an initial capital requirement of ₦25,000,000 and expect the business to grow rapidly, possibly attracting external investors within five years. The partners are concerned about personal liability, continuity of the business, and the ability to raise additional finance in the future.
Question Parts
(a)
Define the following forms of business organisation and state one key characteristic of each: (i) Sole proprietorship, (ii) Partnership, (iii) Private limited company.
(b)
Discuss two advantages and two disadvantages of each of the three forms of business organisation identified in part (a) with particular reference to the concerns of the entrepreneurs (liability, continuity and finance).
(c)
Based on the above analysis, recommend the most suitable form of business organisation for the friends. Justify your recommendation with reference to liability, continuity and future financing needs.
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Question 8 View Details
EcoPack Ltd, a medium‑scale manufacturer of biodegradable packaging, plans to expand its production capacity. The expansion requires a total investment of ₦150,000,000. The management wants to finance the project using a mix of internal funds, bank loan, debentures and equity. The following information is available: - Retained earnings available: ₦30,000,000 (can be used without cost). - Bank loan: interest rate 12% per annum, maximum amount that can be borrowed is ₦70,000,000. - Debentures: 10% annual coupon, flotation cost of 5% of the amount raised, and can be issued up to ₦50,000,000. - New equity: investors require a minimum rate of return of 15%. - The firm’s policy limits total debt (bank loan + debentures) to no more than 40% of the total capital employed. - The project must achieve a minimum weighted average cost of capital (WACC) of 12% to be acceptable. Assume that all costs are calculated on an annual basis and that the retained earnings are considered as equity with zero cost.
Question Parts
(a)
List all feasible sources of finance for the expansion and state any constraints that apply to each source.
(b)
Calculate the annual cost (in ₦) of each external source of finance (bank loan and debentures) for the maximum amount that can be raised under their individual limits.
(c)
Determine a financing mix that satisfies the 40% debt ceiling and minimises the weighted average cost of capital (WACC). Show your calculations and state the resulting WACC (rounded to two decimal places).
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