neco model questions vol1 2017 commerce | Essay

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Question 1 View Details
Obinna runs a small retail shop that sells school stationery. He purchases notebooks at ₦120 each and pens at ₦45 each. In a month he sells 150 notebooks and 200 pens. Fixed costs (rent, electricity, etc.) amount to ₦30,000 per month. He wishes to earn a total profit of at least ₦20,000 for the month and decides to apply the same percentage profit margin to the cost price of each item.
Question Parts
(a)
Determine the profit margin (as a percentage over cost) that must be applied to both notebooks and pens so that the required profit of ₦20,000 is achieved.
(b)
Using the margin found in part (a), calculate the selling price per notebook and per pen (round to the nearest kobo).
(c)
Discuss two advantages and two disadvantages of using a uniform profit margin for different products in a retail business.
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Question 2 View Details
Nigeria imports wheat and exports cocoa. In the current year the country imports 3,000 tonnes of wheat at US$0.30 per kilogram and exports 1,200 tonnes of cocoa at US$2.00 per kilogram. The prevailing exchange rate is ₦410 per US$. The government imposes a 5 % tariff on wheat imports and grants a 10 % export rebate on cocoa earnings. After import, the wheat is processed locally, adding a value of ₦15 per kilogram, and the processed wheat is sold in the domestic market at ₦180 per kilogram.
Question Parts
(a)
Calculate the total value of wheat imports in Naira before the tariff and the total value after the 5 % tariff is applied.
(b)
Calculate the total foreign‑exchange earnings from cocoa exports in Naira after applying the 10 % export rebate.
(c)
Determine the overall trade balance (exports minus imports) in Naira after accounting for the tariff and the export rebate.
(d)
Suggest one policy measure the Nigerian government could adopt to improve the trade balance and briefly explain how it would work.
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Question 3 View Details
A small retailer purchases a single type of consumer good from a wholesaler. The retailer wants to operate profitably while covering his monthly overheads.
Question Parts
(a)
If the purchase price of each unit is ₦800 and the retailer desires a profit margin of 25 % on the cost price, calculate the unit selling price he should charge.
(b)
The retailer incurs fixed monthly overheads of ₦45,000. Using the selling price from part (a), determine the minimum number of units that must be sold each month to break even.
(c)
The wholesaler now offers a 10 % discount on the purchase price. Re‑calculate the unit selling price required to retain the same 25 % profit margin and state the new break‑even quantity.
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Question 4 View Details
A Nigerian exporter sells cocoa beans to an overseas buyer. The transaction involves foreign exchange, export duty and shipping costs.
Question Parts
(a)
The exporter sells 5,000 kg of cocoa beans at US$2.50 per kg. With an exchange rate of ₦460 per US$, calculate the FOB value in Naira and the net revenue after deducting export duty (5 % of FOB), shipping & insurance of ₦150,000 and processing cost of ₦200,000.
(b)
State the profit earned from the transaction, assuming the only costs are the export duty, shipping & insurance and processing cost given above.
(c)
If the exchange rate rises to ₦480 per US$, recompute the FOB value in Naira, the net revenue and profit. Comment briefly on how exchange‑rate fluctuations affect the exporter’s earnings.
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Question 5 View Details
GreenMart is a retailer that sells two products: bottled water (Product X) and snack packs (Product Y). The following data relate to the month of March. - Product X: Cost price (CP) = ₦120 per bottle, Selling price (SP) = ₦180 per bottle. - Product Y: CP = ₦200 per pack, SP = ₦300 per pack. - Sales in March: 800 bottles of X and 500 packs of Y. - The retailer offers a 5 % discount on the total bill when the bill exceeds ₦50,000. - Fixed overheads (rent, salaries, utilities) for the month amount to ₦120,000. - Variable expenses are 10 % of the net sales revenue (i.e., after the discount). Answer the following questions:
Question Parts
(a)
Calculate (i) the total sales revenue before any discount, (ii) the amount of discount received, and (iii) the net sales revenue after the discount.
(b)
Determine (i) the cost of goods sold (COGS), (ii) the gross profit, (iii) the variable expenses, and (iv) the net profit after deducting overheads and variable expenses.
(c)
GreenMart is thinking of changing from a periodic inventory system to a perpetual inventory system. (i) State two advantages of a perpetual system for GreenMart. (ii) Explain briefly how the use of a perpetual system could affect the profit figures obtained in part (b).
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Question 6 View Details
PrimeSupply is a wholesaler that buys electronic gadgets from a manufacturer and sells them to retail outlets. The data below relate to a particular gadget model. - Purchase price per unit (cost to PrimeSupply) = ₦45,000. - The manufacturer offers a 2 % cash discount if payment is made within 10 days; otherwise the full amount is payable after 30 days. - Annual holding‑cost rate = 25 % of the unit cost. - Ordering (setup) cost per order = ₦15,000 (covers transport, paperwork, etc.). - Forecast annual demand for the gadget = 4,800 units. Answer the following questions:
Question Parts
(a)
Calculate the effective annual interest rate implied by the 2 % cash discount, assuming the wholesaler would otherwise obtain credit for the full 30‑day period.
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Question 7 View Details
XYZ Ltd is a newly registered company planning to launch a retail business. The owners are considering whether to operate as a sole proprietorship, a partnership, a private limited liability company (Ltd) or a cooperative. They are concerned about liability, capital raising, management control and tax implications.
Question Parts
(a)
Provide a concise definition of each of the four forms of business organization mentioned.
(b)
Using a comparative table, discuss the advantages and disadvantages of each form with respect to:
() Liability of owners.
() Ability to raise capital.
() Management control.
() Tax treatment.
(c)
Based on the analysis, recommend the most suitable form for XYZ Ltd and justify your recommendation with at least three reasons.
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Question 8 View Details
ABC Manufacturing Co. requires additional funds to expand its production capacity. The firm is evaluating three sources of finance: (i) a bank term loan of ₦5,000,000 at 12% per annum payable over 5 years, (ii) issuing 10,000 ordinary shares at ₦800 each, (iii) a 5‑year debenture issue of ₦4,000,000 at 10% per annum with a flotation cost of 2% of the issue amount.
Question Parts
(a)
Calculate the annual interest payment on the bank loan and the total interest payable over the loan period.
(b)
Determine the total amount of capital that would be raised if the ordinary shares are issued, and compute the annual cost of equity assuming the shareholders require a rate of return of 15% per annum.
(c)
Compute the net proceeds from the debenture issue after flotation costs and calculate the annual interest expense. Also, determine the effective interest rate (cost of debt) taking into account the flotation cost.
(d)
Considering the calculations and the qualitative factors such as control dilution and financial risk, recommend the optimal mix of these three sources for ABC Manufacturing. Provide a justified recommendation.
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