Neco 2022 Commerce Question 6

Practice essay / theory question 6 from the 2022 Neco Commerce examination. This question covers Wholesale Trade, Trade discount, Cash discount, Profit and cash flow .

Neco 2022 Commerce Essay / Theory
Topics: Wholesale Trade Trade discount Cash discount Profit and cash flow
Question 6 NECO • 2022 • COMMERCE • essay

A wholesaler purchases 10,000 units of a product from a manufacturer at ₦3,000 per unit.

Question Parts

( a )
The wholesaler adds a markup of 40 % on his purchase cost and then gives a trade discount of 10 % on the resulting list price. If a cash discount of 2 % is offered for payment within 30 days, determine the net price per unit that retailers will pay when they take the cash discount.
( b )
Assuming the retailers order 8,000 units now and all of them take the cash discount, calculate the total cash inflow the wholesaler will receive from this order.
( c )
The wholesaler incurs operating expenses of ₦1,200,000 per quarter. Using the cash inflow from part (b) and the cost of the 8,000 units sold, determine the profit (or loss) for the first quarter.
( d )
The wholesaler is considering removing the cash discount and extending the credit period to 90 days while keeping the trade discount unchanged. (i) State the new net price per unit (without cash discount). (ii) Discuss qualitatively how this change is likely to affect the wholesaler’s cash flow and overall profitability, assuming the same order quantity.

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About This Question

This is Neco 2022 Commerce Question 6. It is one of the essay questions from the 2022 Neco Commerce examination.

The question covers Wholesale Trade, Trade discount, Cash discount, Profit and cash flow .

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