Neco 2024 Commerce Question 6

Practice essay / theory question 6 from the 2024 Neco Commerce examination. This question covers Wholesale Trade, Trade Discount, Sales Tax, Cost‑Benefit Analysis .

Neco 2024 Commerce Essay / Theory
Topics: Wholesale Trade Trade Discount Sales Tax Cost‑Benefit Analysis
Question 6 NECO • 2024 • COMMERCE • essay

A wholesale distributor purchases a batch of 500 units of a popular kitchen appliance at a total cost of ₦12,000,000. The distributor offers its retailers a tiered trade discount based on the order size: 2% discount for orders up to 100 units, 4% discount for orders between 101 and 250 units, and 6% discount for orders above 250 units. Retailers also pay a sales tax of 5% on the invoice amount after trade discount. The distributor adds a fixed handling charge of ₦10,000 per order regardless of size.

Question Parts

( a )
If a retailer orders 180 units, calculate the invoice amount payable by the retailer (including trade discount, sales tax, and handling charge). Show all steps.
( b )
Determine the effective unit cost to the retailer for the 180‑unit order.
( c )
The distributor is evaluating whether to increase the handling charge to ₦25,000 per order while keeping the same discount structure. Assuming the retailer still orders 180 units, calculate the new invoice amount and discuss the likely effect on the retailer’s order‑quantity decision, referencing price‑elasticity concepts.
( d )
Explain two advantages and two disadvantages of using a tiered trade‑discount system from the perspective of the wholesaler.

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About This Question

This is Neco 2024 Commerce Question 6. It is one of the essay questions from the 2024 Neco Commerce examination.

The question covers Wholesale Trade, Trade Discount, Sales Tax, Cost‑Benefit Analysis .

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