neco model questions vol1 2019 commerce | Essay

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Question 1 View Details
Commerce is a fundamental activity in any economy. Answer the following questions in detail.
Question Parts
(a)
Define commerce and clearly distinguish it from trade.
(b)
Discuss three ways in which commerce contributes to the growth of a nation’s Gross Domestic Product (GDP).
(c)
Evaluate how e‑commerce has altered traditional commerce in Nigeria, giving at least two positive and two negative impacts.
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Question 2 View Details
A Nigerian cocoa exporter intends to sell 10,000 kg of cocoa beans to a European buyer. The following data are given: - FOB price: $2.50 per kg - Exchange rate: ₦460 per US$1 - Export levy: 5 % of the FOB value (paid by the exporter) - Shipping and insurance cost: $0.30 per kg (added to the FOB value to obtain CIF) - Import duty (paid by the buyer): 10 % of the CIF value - Local transportation cost in Nigeria: ₦150 per kg (paid by the exporter) Answer the questions that follow.
Question Parts
(a)
Calculate the total revenue in Naira that the exporter receives after deducting the export levy and local transportation cost, but before the buyer’s import duty is paid.
(b)
Determine the effective export price per kilogram in Naira after all deductions (export levy and local transport).
(c)
Discuss two advantages and two disadvantages of the above trade policies (export levy, import duty, and local transport cost) for the exporter and for the Nigerian economy as a whole.
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Question 3 View Details
A small trader purchases a batch of electronic gadgets at a unit cost of ₦8,000. He intends to earn a profit margin of 25 % on the cost price and to sell the gadgets at a single price per unit. To stimulate sales, he offers a discount of 10 % on the selling price. The trader incurs fixed monthly costs of ₦150,000 (rent, salaries, utilities) and the variable cost per unit remains the purchase cost of ₦8,000.
Question Parts
(a)
Determine the regular selling price per unit that will give the trader a 25 % profit margin on the cost price.
(b)
If a discount of 10 % is granted on the selling price calculated in part (a), compute the new selling price and the resulting profit margin (as a percentage of the discounted price).
(c)
Using the discounted selling price from part (b), determine the number of units the trader must sell each month to cover the fixed costs (i.e., the break‑even quantity).
(d)
Briefly discuss how seasonal fluctuations in demand could affect the break‑even analysis and suggest two practical strategies the trader could adopt to mitigate the associated risks.
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Question 4 View Details
A Nigerian importer plans to import 5,000 kg of cocoa beans from Ghana. The world market price is US$2.00 per kilogram. The current spot exchange rate is ₦750 per US$1. Import duty is 5 % of the CIF (Cost, Insurance, Freight) value. Freight charges amount to US$0.30 per kilogram. Insurance is charged at 0.2 % of the CIF value. To hedge against exchange‑rate risk, the importer can enter a forward contract at a rate of ₦740 per US$1.
Question Parts
(a)
Calculate the total CIF value in US dollars, showing clearly how insurance is incorporated.
(b)
Determine the total cost in Naira if the importer pays using the spot exchange rate of ₦750 per US$1, including import duty.
(c)
If the importer uses the forward contract at ₦740 per US$1, compute the total cost in Naira and the effective cost per kilogram.
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Question 5 View Details
A retailer purchases a line of electronic gadgets from a supplier. The list price of each gadget is ₦10,000. The supplier grants a trade discount of 10% on the list price. If the retailer pays within 30 days, a cash discount of 2% is allowed on the discounted price. The retailer incurs fixed overhead costs of ₦120,000 per month. The retailer wishes to earn a profit of 25 % on the cost of each gadget. Using the above information, answer the following:
Question Parts
(a)
Calculate the net cost of one gadget to the retailer after allowing for the trade discount and the cash discount.
(b)
Determine the selling price per gadget that will give the retailer a 25 % profit on the cost calculated in part (a).
(c)
If the retailer expects to sell the gadgets each month, calculate the break‑even quantity (in units) required to cover the fixed overhead costs.
(d)
Assuming the retailer actually sells 800 gadgets in a month, compute the expected monthly profit.
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Question 6 View Details
A wholesaler purchases a bulk commodity from a manufacturer. The list price of the commodity is ₦2,500 per unit. The manufacturer offers a trade discount of 5 % on the list price and a cash discount of 2 % if payment is made within 10 days. In addition, the wholesaler receives a quantity discount on the list price as follows: - 0–199 units: no discount - 200–499 units: 3 % discount - 500 units and above: 6 % discount The wholesaler incurs a fixed ordering cost of ₦8,000 per order and a holding cost of ₦15 per unit per month. The wholesaler expects an annual sales revenue of ₦5,200,000. Answer the following questions:
Question Parts
(a)
For an order of 500 units, calculate the net unit price after applying the trade discount and the cash discount (ignore the quantity discount for this part).
(b)
An order of 650 units is placed. Determine the cheapest possible net unit price by applying the appropriate quantity discount, then the trade discount, and finally the cash discount.
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Question 7 View Details
Alpha Traders is a Nigerian business that started as a partnership between three friends in 2015. In 2022 they decided to convert to a limited liability company (LLC) to raise capital and limit personal liability. The partnership agreement stipulated profit sharing in the ratio 2:3:5 among partners A, B, and C respectively. After conversion, the share capital was issued as 10,000 ordinary shares at ₦500 each, subscribed by the three former partners in proportion to their previous profit shares. The company now employs 25 staff and plans to expand by opening a new branch.
Question Parts
(a)
Explain three key differences between a partnership and a limited liability company under Nigerian law.
(b)
Calculate the number of shares each former partner subscribed to after conversion.
(c)
Discuss two advantages and two disadvantages of converting to an LLC for Alpha Traders, considering legal and financial aspects.
(d)
The new branch requires an initial investment of ₦8,000,000. The company decides to finance it by issuing new shares at the same nominal value of ₦500. (i) How many new shares must be issued? (ii) Assuming the market price per share is ₦750, calculate the total amount the company would raise and comment on the effect on existing shareholders' ownership percentage.
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Question 8 View Details
Beta Manufacturing Ltd is a medium‑scale manufacturing firm in Nigeria that produces plastic containers. The firm needs to finance the purchase of new machinery costing ₦25,000,000. Management is considering three sources of finance: (i) a 5‑year bank loan at 12% per annum payable annually, (ii) issuing 5‑year debentures at a coupon rate of 10% payable semi‑annually, with a market yield of 9%, and (iii) retaining earnings, where the firm expects to generate after‑tax profit of ₦4,000,000 each year for the next five years.
Question Parts
(a)
For each source of finance, identify one advantage and one disadvantage specific to the Nigerian business environment.
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