neco model questions vol1 2020 commerce | Essay

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Question 1 View Details
A small manufacturing firm in Nigeria produces hand‑crafted leather bags. The firm sells its bags to a local retailer at a price of ₦12,000 per bag. The retailer adds a markup of 30 % to determine the selling price to the final consumer. The firm incurs a variable cost of ₦7,500 per bag and fixed costs of ₦1,200,000 per year. The retailer’s fixed costs are ₦300,000 per year.
Question Parts
(a)
Determine the break‑even quantity for the manufacturer.
(b)
Determine the break‑even quantity for the retailer.
(c)
Discuss two ways in which the manufacturer could increase its profit without changing the selling price to the retailer.
(d)
Explain how the introduction of e‑commerce platforms could affect the profit margins of both the manufacturer and the retailer.
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Question 2 View Details
The table below shows Nigeria’s export and import values (in billions of naira) for three consecutive years. | Year | Exports (₦ bn) | Imports (₦ bn) | |------|----------------|----------------| | 2022 | 4.5 | 6.3 | | 2023 | 5.2 | 7.1 | | 2024*| 5.8 | 7.8 | *2024 figures are projected estimates. In 2023, imported automobiles accounted for 15 % of total imports.
Question Parts
(a)
Calculate the terms of trade (ToT) for each year as (Exports ÷ Imports) × 100 and comment on the trend observed.
(b)
If the government imposes a 10 % tariff on imported automobiles (which made up 15 % of total imports in 2023), estimate the immediate effect on the total import value, assuming quantities remain unchanged.
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Question 3 View Details
A young entrepreneur runs a home‑based bakery that produces and sells customised cupcakes. The following information is known for the current financial year: - Fixed costs (rent, utilities, equipment depreciation) amount to ₦1,200,000. - The variable cost per cupcake (ingredients, labour, packaging) is ₦250. - The average selling price per cupcake is ₦500. - The entrepreneur plans to sell 8,000 cupcakes this year. - Corporate tax rate is 30% on profit before tax. - The entrepreneur is considering a 10% increase in the variable cost due to a rise in ingredient prices. Answer the following questions:
Question Parts
(a)
Calculate the break‑even quantity of cupcakes for the current year.
(b)
If the variable cost per cupcake rises by 10%, determine the new break‑even quantity and comment on the effect of the increase.
(c)
Discuss two non‑financial factors that could influence the success of the home‑based bakery.
(d)
Assuming the entrepreneur sells the planned 8,000 cupcakes, compute the profit after tax for the year.
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Question 4 View Details
A Nigerian trading company imports 20,000 kg of cocoa beans from Ghana for processing. The following data apply: - CIF price in Ghanaian cedi (GHS) = GHS 45 per kg. - Exchange rate at the time of purchase: 1 GHS = ₦55. - Freight from the Ghanaian port to Lagos port (paid by the exporter) = included in CIF. - Insurance premium (1% of CIF value) is payable in Nigeria in Naira. - Import duty = 5% of CIF value (converted to Naira). - Value Added Tax (VAT) = 7.5% of (CIF value + duty + insurance). - The company uses the FOB term for a future shipment of finished chocolate bars to the United Kingdom. The FOB price per kg of chocolate bars is projected to be ₦1,200. - Desired profit margin on the export sale is 20% of the total landed cost. Answer the following questions:
Question Parts
(a)
Calculate the total landed cost (in Naira) of the imported cocoa beans, showing all intermediate steps.
(b)
If the Naira depreciates by 5% against the Ghanaian cedi after the purchase, recalculate the landed cost in Naira and explain the impact on the company’s profitability.
(c)
Compare the advantages and disadvantages of using FOB versus CIF terms for the company’s future export of processed chocolate bars to the United Kingdom.
(d)
The company intends to sell the processed chocolate bars at an FOB price that yields a 20% profit margin over the total landed cost of the raw cocoa beans (as calculated in part a). Determine the required FOB price per kg of chocolate bars.
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Question 5 View Details
A retailer deals in electronic gadgets. The retailer purchases each unit of a particular gadget at a cost price of ₦2,500. The retailer applies a markup of 30% on the cost price to determine the selling price. The retailer also offers a 10% discount on the selling price to customers during a promotional period. The retailer's fixed monthly overhead costs amount to ₦150,000.
Question Parts
(a)
Calculate the selling price per unit before any discount.
(b)
If a 10% discount is granted on the selling price, determine the net selling price per unit and the profit earned on each unit sold at the discounted price.
(c)
Using the profit per unit from part (b), calculate the minimum number of units the retailer must sell in a month to cover the fixed overhead costs (i.e., the break‑even point).
(d)
Assume the cost price per unit rises by 5% while the retailer keeps the same markup and discount rates. Discuss qualitatively how this change affects (i) the profit per unit, (ii) the break‑even point, and (iii) the retailer’s overall profitability.
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Question 6 View Details
A wholesaler purchases bulk quantities of a product from a manufacturer at a unit cost of ₦1,800. The wholesaler sells the product to retailers and applies a trade discount of 12% on the total invoice amount. In addition, the wholesaler offers a cash discount of 3% to retailers who pay within 10 days of the invoice date.
Question Parts
(a)
For an order of 500 units, calculate the invoice amount after applying the trade discount.
(b)
If the retailer pays within the discount period, determine the amount payable after the 3% cash discount.
(c)
The wholesaler sets a selling price of ₦2,100 per unit (before any cash discount). Compute the gross profit margin expressed as a percentage.
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Question 7 View Details
A group of three recent graduates intends to start a technology‑driven business that will develop mobile applications. The venture will require substantial start‑up capital, the founders want to limit their personal liability, and they anticipate seeking external investors in the near future.
Question Parts
(a)
Define each of the following forms of business organization as recognised in Nigeria: (i) Sole proprietorship, (ii) Partnership, (iii) Private limited company (Ltd).
(b)
State three advantages and three disadvantages of each of the three business forms identified in part (a).
(c)
Based on the scenario, recommend the most suitable form of business organization for the graduates. Justify your recommendation by referring to (i) liability, (ii) ability to raise capital, and (iii) management control.
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Question 8 View Details
ABC Manufacturing Plc plans to expand its production capacity and requires a total of ₦500 million. The management is considering a mix of internal and external sources of finance.
Question Parts
(a)
Identify three internal and three external sources of finance that ABC Manufacturing could use for the expansion.
(b)
For each source listed in part (a), discuss one advantage and one limitation.
(c)
Assume ABC decides to raise the external portion of ₦300 million as follows: ₦150 million through a bank loan at 12 % per annum payable annually for 5 years with a one‑time arrangement fee of 2 % of the loan amount, and ₦150 million through 10‑year debentures bearing 10 % interest per annum, with a one‑time issue cost of 3 % of the face value. Calculate the total cost of each external source over the 5‑year period and state which is cheaper on a per‑year basis.
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