Neco 2021 Commerce Question 6

Practice essay / theory question 6 from the 2021 Neco Commerce examination. This question covers Wholesale Trade .

Neco 2021 Commerce Essay / Theory
Topic: Wholesale Trade
Question 6 NECO • 2021 • COMMERCE • essay

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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About This Question

This is Neco 2021 Commerce Question 6. It is one of the essay questions from the 2021 Neco Commerce examination.

The question covers Wholesale Trade .

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