Practice neco model questions vol1 commerce 2017 Past Questions

Question 1 View Details

A trader purchases 200 units of a product at $\text{₦}150$ each. He incurs fixed overhead costs of $\text{₦}10{,}000$ per month. He sells each unit for $\text{₦}250$. How many units must he sell in a month to break even?

A. 150

B. 80

C. 120

Correct D. 100

Correct Answer: D

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Question 2 View Details

An exporter receives a payment of $\text{€}20{,}000$. The exchange rate is $\text{₦}460$ per $\text{€}1$. The bank deducts a commission of 1.5% on the converted amount. How many naira does the exporter receive after the commission?

Correct A. 9062000

B. 8895000

C. 9040000

D. 9123000

Correct Answer: A

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Question 3 View Details

A wholesaler prepares a proforma invoice for 150 units of item X. The marked price per unit is $\text{₦}3{,}200$. The buyer receives a trade discount of 12% on the marked price. After the discount, a sales tax of 5% is added on the discounted amount. Freight charges of $\text{₦}18{,}000$ are then added to the invoice. The wholesaler's cost price per unit is $\text{₦}2{,}400$. What is the profit margin (percentage profit on cost) that the wholesaler makes on this transaction?

A. 31.0

B. 26.8

C. 24.5

Correct D. 28.2

Correct Answer: D

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Question 4 View Details

A company needs to schedule a live video conference with four regional managers located in time zones GMT+1, GMT+2, GMT+3 and GMT+4. The meeting must start at a time that is between 9:00 am and 5:00 pm local time for each manager. Determine the range of possible start times in Coordinated Universal Time (UTC) that satisfy this condition.

Correct A. 08:00 UTC to 13:00 UTC

B. 09:00 UTC to 14:00 UTC

C. 08:30 UTC to 13:30 UTC

D. 07:00 UTC to 12:00 UTC

Correct Answer: A

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Question 5 View Details

A transport company operates a truck that can carry up to 20 tonnes. The fixed operating cost per trip (driver salary, permits, etc.) is $\text{₦}30{,}000$. Fuel consumption is 0.4 litre per kilometre when the truck is empty and increases by 0.02 litre per kilometre for each tonne of load carried. Fuel costs $\text{₦}165$ per litre. The truck travels 250 km per trip. The company earns revenue of $\text{₦}5{,}000$ per tonne carried. To achieve a profit of at least $\text{₦}20{,}000$ per trip, what is the minimum load (in tonnes) that must be carried?

A. 15

Correct B. 16

C. 14

D. 18

Correct Answer: B

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Question 6 View Details

A firm requires total financing of $\text{₦}5{,}000{,}000$. It can raise funds through a loan at 8% interest, equity at 12% cost, and retained earnings (cost 0%). The loan amount cannot exceed 40% of the total financing and the overall weighted average cost of capital (WACC) must not exceed 9%. Assuming the firm uses the maximum permissible loan and the minimum amount of retained earnings needed to satisfy the WACC constraint, determine (a) the maximum loan amount, (b) the minimum retained earnings required, and (c) the equity amount that will be raised.

A. (a) ₦2,000,000; (b) ₦500,000; (c) ₦2,500,000

B. (a) ₦2,000,000; (b) ₦600,000; (c) ₦2,400,000

Correct C. (a) ₦2,000,000; (b) ₦583,333.33; (c) ₦2,416,666.67

D. (a) ₦1,800,000; (b) ₦583,333.33; (c) ₦2,616,666.67

Correct Answer: C

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Question 7 View Details

An insurance company estimates the average loss per motor policy to be $\text{₦}120{,}000$. It adds a loading of 25% of the expected loss, then applies a 5% tax on the premium, and finally offers a 10% discount for early payment. (a) Calculate the final premium payable by a customer. (b) If the company wants to earn a total profit of $\text{₦}2{,}000{,}000$ from this policy, assuming actual losses equal the expected loss, how many such policies must be sold?

A. (a) ₦144,000; (b) 90 policies

Correct B. (a) ₦141,750; (b) 92 policies

C. (a) ₦138,600; (b) 100 policies

D. (a) ₦140,250; (b) 95 policies

Correct Answer: B

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Question 8 View Details

A company advertises a product through three media: TV, radio and newspaper. The estimated reach is 150,000 for TV, 80,000 for radio and 60,000 for newspaper. Surveys show that 30% of the TV audience also watches radio, 20% of the TV audience also reads the newspaper, and 25% of the radio audience also reads the newspaper. Moreover, 10% of the total distinct audience is exposed to all three media. Determine the total number of distinct individuals reached by the campaign.

A. 225,000 distinct individuals (approximately)

Correct B. 216,667 distinct individuals (approximately)

C. 200,000 distinct individuals (approximately)

D. 210,000 distinct individuals (approximately)

Correct Answer: B

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Question 9 View Details

A retailer buys a product for $\text{₦}4{,}500$ per unit. Fixed monthly costs are $\text{₦}180{,}000$. The retailer applies a 40% markup on the cost price to set the selling price, then offers a seasonal discount of 15% on that selling price. (a) Find the effective selling price per unit after discount. (b) Determine the minimum number of units that must be sold in a month to achieve a profit of at least $\text{₦}120{,}000$.

A. (a) ₦5,250; (b) 340 units

B. (a) ₦5,500; (b) 360 units

Correct C. (a) ₦5,355; (b) 351 units

D. (a) ₦5,400; (b) 345 units

Correct Answer: C

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Question 10 View Details

An importer plans to bring in 10,000 units of a gadget. The FOB price in USD is $\$12$ per unit and the exchange rate is $\text{₦}410$ per USD. Freight costs $\text{₦}1{,}200$ per unit. A 5% import duty is charged on the CIF value, and a 2% surcharge is applied on the total cost (including duty). (a) Compute the total landed cost per unit in Naira. (b) If the importer wants a 25% profit margin over the landed cost, what should be the selling price per unit in Naira?

A. (a) ₦6,548 per unit (approx); (b) ₦8,185 per unit (approx)

Correct B. (a) ₦6,555 per unit (approx); (b) ₦8,193 per unit (approx)

C. (a) ₦6,426 per unit (approx); (b) ₦8,033 per unit (approx)

D. (a) ₦6,493 per unit (approx); (b) ₦8,116 per unit (approx)

Correct Answer: B

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Question 11 View Details

An insurance company offers a motor insurance policy. The basic premium is calculated at a rate of 2.5 % of the sum insured. The company adds a loading of 15 % on the basic premium to cover administrative expenses. A government tax of 5 % is then applied on the loaded premium. Finally, the insurer gives a discount of 10 % on the total amount (loaded premium + tax) to attract customers. If the sum insured is ₦(1,200,000), what is the final premium payable by the policyholder? Express your answer in naira to the nearest kobo.

A. 28350.00

B. 31050.00

C. 32775.00

Correct D. 32602.50

Correct Answer: D

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Question 12 View Details

An investor bought shares of XYZ Ltd on three occasions. - Day 1: 200 shares at ₦(150) each, paying a brokerage commission of 0.5 % on the transaction value. - Day 2: 350 shares at ₦(165) each, with the same commission rate. - Day 3: 150 shares at ₦(158) each, also with a 0.5 % commission. Later he sold 400 shares at a uniform price of ₦(P) per share, paying a selling commission of 0.5 % on the sale value and a capital‑gains tax of 10 % on the profit before tax. What is the minimum selling price (P) (in naira, to two decimal places) that will give him a net profit of at least ₦(20,000) after all commissions and tax?

A. 211.17

B. 215.57

C. 337.33

Correct D. 216.78

Correct Answer: D

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Question 13 View Details

An advertising agency proposes two media plans for a product launch targeting a market of 500,000 people. Plan A: - TV reaches 40 % of the market, cost ₦(2,500,000), frequency 3 exposures per viewer. - Radio reaches 30 % of the market, cost ₦(1,200,000), frequency 2 exposures per listener. - Overlap between TV and radio audiences is 10 % of the market; overlapping viewers receive the sum of the two frequencies. Plan B: - Newspaper reaches 25 % of the market, cost ₦(800,000), frequency 4 exposures. - Online banner reaches 35 % of the market, cost ₦(1,500,000), frequency 5 exposures. - Overlap between newspaper and online audiences is 5 % of the market; overlapping individuals receive the sum of the two frequencies. The client requires a minimum Gross Rating Point (GRP) of 150 and wants the cost per GRP (CPG) to be as low as possible. Which plan satisfies the GRP requirement and yields the lower CPG? State the selected plan and its CPG (rounded to two decimal places, in naira per GRP).

Correct A. Plan B, 8363.64

B. Plan A, 20555.56

C. Plan B, 9000.00

D. Plan A, 15000.00

Correct Answer: A

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Question 14 View Details

Two listed companies, Alpha and Beta, are being evaluated. - Alpha: share price ₦(45), earnings per share (EPS) ₦(3.60), dividend per share ₦(0.90). Expected earnings growth rate 8 % per year for the next 5 years. Required rate of return 12 %. - Beta: share price ₦(60), EPS ₦(5.20), dividend per share ₦(1.20). Expected earnings growth rate 5 % per year for the next 5 years. Required rate of return 10 %. Using the Gordon Growth Model, compute the intrinsic value of each share. Then calculate the price‑to‑earnings (P/E) ratio and dividend yield for each. Based on a combination of lower P/E and higher dividend yield relative to intrinsic value, recommend which stock is undervalued and give its intrinsic value (rounded to two decimal places).

A. Alpha, 24.30

Correct B. Beta, 25.20

C. Alpha, 20.00

D. Beta, 30.00

Correct Answer: B

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Question 15 View Details

A retailer stocks a product in a warehouse. Annual demand is 12,000 units. The ordering cost is ₦(5,000) per order. Holding cost is 20 % of the unit cost per year, and the unit cost is ₦(150). Lead time is 10 days, and daily demand follows a normal distribution with standard deviation 5 units. The retailer desires a 95 % service level. Compute: 1. The Economic Order Quantity (EOQ). 2. The safety stock required for the 95 % service level. 3. The total annual cost (ordering + holding + purchase cost), rounded to the nearest naira.

A. 1750000

B. 1950000

Correct C. 1860780

D. 1820000

Correct Answer: C

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Question 16 View Details

A trader buys 120 shirts at ₦1,800 each. He adds a profit margin of $25\%$ on the cost price and then applies a value‑added tax (VAT) of $7.5\%$ on the selling price (including profit). What is the final selling price per shirt (including VAT)?

Correct A. ₦2,418.75

B. ₦2,385.00

C. ₦2,322.00

D. ₦2,362.50

Correct Answer: A

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Question 17 View Details

Partners A, B and C invest in a business as follows: A invests $30,000$ naira for 8 months, B invests $45,000$ naira for 5 months, and C invests $25,000$ naira for 10 months. The net profit of the partnership is $96,000$ naira and is to be shared in proportion to each partner's capital multiplied by the time the capital was invested. How much profit does each partner receive?

A. A: ₦28,800; B: ₦43,200; C: ₦24,000

Correct B. A: ₦32,224; B: ₦30,210; C: ₦33,566

C. A: ₦33,391; B: ₦20,870; C: ₦41,739

D. A: ₦28,272; B: ₦53,000; C: ₦14,728

Correct Answer: B

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Question 18 View Details

A transport company operates a bus that incurs a fixed daily cost of ₦15,000 and a variable cost of ₦120 per kilometre travelled. Each trip covers 80 km and the bus can carry a maximum of 40 passengers, charging a fare of ₦500 per passenger per trip. On a particular day the bus makes 5 trips and is filled to $75\%$ of its capacity on each trip. Determine the profit or loss for that day.

A. ₦15,000 profit

B. ₦8,000 profit

C. ₦5,000 loss

Correct D. ₦12,000 profit

Correct Answer: D

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Question 19 View Details

A customer deposits $200,000$ naira in a savings account that pays a nominal interest rate of $6\%$ per annum, compounded quarterly. After 2 years the amount is withdrawn and reinvested in another account that offers a nominal rate of $5.5\%$ per annum, compounded monthly, for a further 3 years. What is the total amount the customer will have at the end of the 5‑year period?

A. ₦270,000

B. ₦260,500

C. ₦250,000

Correct D. ₦265,614

Correct Answer: D

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Question 20 View Details

A television is advertised in a newspaper with a "sale price" of $150,000$ naira, stated to be "including all taxes". The store actually applies a sales tax of $12\%$ on the pre‑tax price, then gives a discount of $15\%$ on the same pre‑tax price, and finally adds a fixed service charge of $5,000$ naira. The consumer pays the amount shown on the receipt. (a) Calculate the amount actually paid by the consumer. (b) Under the Consumer Protection Act, the advertised price (including taxes) must not be more than $5\%$ higher than the total amount payable after all discounts and charges. Does the advertisement comply with the law? Give the payable amount and answer "Yes" or "No".

A. Payable amount: ₦140,000; Compliance: Yes

B. Payable amount: ₦132,500; Compliance: No

C. Payable amount: ₦129,910; Compliance: No

Correct D. Payable amount: ₦134,911; Compliance: No

Correct Answer: D

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Question 21 View Details

A wholesaler purchases 500 units of a product for a total cost of $\text{₦}120,000$. He intends to sell the units to retailers at a list price per unit. He offers a trade discount of $12\%$ on the list price, and an additional cash discount of $3\%$ on the discounted price for payments made within 10 days. The wholesaler wants to achieve a net profit margin of $15\%$ on his total cost after all discounts are taken. What should be the list price per unit (in naira, rounded to two decimal places)?

Correct A. 323.34

B. 340.50

C. 300.75

D. 315.00

Correct Answer: A

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Question 22 View Details

A retailer needs $\text{₦}2,000,000$ to purchase inventory. He can obtain the funds by either (A) a bank loan at $10\%$ per annum payable annually, with an arrangement fee of $2\%$ of the loan amount, or (B) issuing 5‑year debentures at $8\%$ per annum payable annually, with an underwriting commission of $1.5\%$ of the issue amount and a flotation cost of $\text{₦}30,000$. For both options the principal is repaid at the end of the 5‑year period and interest is paid each year. Which option results in a lower total cash outflow over the 5 years? State the cheaper option.

Correct A. Option B (debentures)

B. Option A (bank loan) - lower cost

C. Option B (debentures) - not cheaper

D. Option A (bank loan)

Correct Answer: A

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Question 23 View Details

Briefly explain two reasons why wholesalers prefer to purchase goods in large quantities.

Correct A. 1. Economies of scale - lower unit cost due to trade discounts. 2. Fewer orders lower handling, storage and administrative costs.

B. 1. Improved cash flow from delayed payments. 2. Increased marketing opportunities through bulk buying.

C. 1. Access to exclusive brands - limited competition. 2. Ability to negotiate higher selling prices with customers.

D. 1. Reduced transportation costs due to bulk shipping. 2. Lower taxes on large inventory purchases.

Correct Answer: A

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Question 24 View Details

A retailer wishes to acquire equipment with a list price of $\text{₦}1,200,000$. Option A is a cash purchase that gives a 5\% discount on the list price. Option B is a hire‑purchase arrangement over 4 years with a down payment of 30\% of the list price, equal annual principal repayments, and interest of 12\% per annum on the reducing balance. All interest is paid each year together with the principal installment, and the remaining balance is cleared at the end of the fourth year. Which option has the lower total cost to the retailer? Show the total cash outflow for each option.

A. Hire‑purchase is cheaper; total cash cost = ₦1,140,000, hire‑purchase total cost = ₦1,100,000

B. Cash purchase is cheaper; total cash cost = ₦1,200,000, hire‑purchase total cost = ₦1,452,000

C. Cash purchase is cheaper; total cash cost = ₦1,140,000, hire‑purchase total cost = ₦1,380,000

Correct D. Cash purchase is cheaper; total cash cost = ₦1,140,000, hire‑purchase total cost = ₦1,452,000

Correct Answer: D

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Question 25 View Details

A consumer buys a refrigerator for $\text{₦}240,000$. After 8 months it stops working because of a manufacturing defect. Under the Consumer Protection Act the consumer may obtain a refund, repair or replacement. If the consumer chooses a refund, the retailer may deduct a reasonable amount for depreciation, assuming straight‑line depreciation over a useful life of 5 years. The current market price of the same model has risen to $\text{₦}260,000$. The consumer also considers claiming damages equal to 10\% of the purchase price for inconvenience. Calculate (a) the refund amount after depreciation, (b) the total amount the consumer would receive if he also claims the 10\% damages, and (c) compare this total with the cost of obtaining a replacement (including the price increase). Should the consumer accept the refund with damages or opt for replacement? Provide reasoning.

A. (a) ₦208,000; (b) ₦232,000; (c) Replacement is preferable because ₦232,000 > ₦260,000.

B. (a) ₦163,200; (b) ₦187,200; (c) Refund with damages is preferable because ₦187,200 < ₦260,000.

Correct C. (a) ₦208,000; (b) ₦232,000; (c) Refund with damages is preferable because ₦232,000 < ₦260,000.

D. (a) ₦208,000; (b) ₦218,000; (c) Refund with damages is preferable because ₦218,000 < ₦260,000.

Correct Answer: C

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