Practice neco model questions vol1 commerce 2020 Past Questions

Question 1 View Details

A retailer purchases inventory costing ₦200,000 on credit. The supplier offers a discount of $2\%$ if payment is made within 20 days; otherwise the full price is payable 60 days later. The retailer can also obtain a bank loan at $12\%$ per annum simple interest, repayable in 60 days. Which option results in a lower cost of financing the purchase? State the cheaper option.

A. Cash payment with discount

Correct B. Bank loan

C. Early‑payment discount

D. Credit purchase without discount

Correct Answer: B

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Question 2 View Details

A company is choosing between two advertising campaigns for a new product that sells for $\text{₦}5,000$ per unit. Campaign A charges a fixed fee of $\text{₦}150,000$ plus a variable cost equal to $5\%$ of sales revenue. Campaign B has no fixed fee but a variable cost equal to $8\%$ of sales revenue. Expected sales volume is between 30 and 80 units. Determine the sales volume at which the total advertising cost of the two campaigns is equal, and indicate which campaign is cheaper for the realistic sales range.

Correct A. Campaign B is cheaper for any realistic sales volume (30-80 units); break‑even at 1,000 units

B. Campaign B is cheaper for any realistic sales volume (30-80 units); break‑even at 500 units

C. Campaign A is cheaper for any realistic sales volume (30-80 units); break‑even at 500 units

D. Campaign A is cheaper for any realistic sales volume (30-80 units); break‑even at 1,000 units

Correct Answer: A

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Question 3 View Details

A merchant takes a loan of $\text{₦}1,200,000$ at a nominal annual rate of $15\%$ compounded monthly. He plans to settle the loan after 18 months, but the bank imposes a pre‑payment penalty of $2\%$ of the outstanding principal at the time of settlement. Calculate (i) the total amount the merchant must pay on settlement, and (ii) the effective annual interest rate he actually incurs over the 18‑month period.

A. Total payable ≈ ₦1,600,500; effective annual rate ≈ 18.3%

B. Total payable ≈ ₦1,530,710; effective annual rate ≈ 19.2%

C. Total payable ≈ ₦1,480,000; effective annual rate ≈ 16.9%

Correct D. Total payable ≈ ₦1,530,710; effective annual rate ≈ 17.6\%

Correct Answer: D

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Question 4 View Details

An insurance company offers fire insurance for a small shop with a sum insured of $\text{₦}30,000,000$. The actuarial pure premium is $0.8\%$ of the sum insured. The company adds a loading of $25\%$ for administrative expenses and a tax of $5\%$ on the gross premium. (i) Compute the final premium payable by the shop. (ii) If each claim amounts to $\text{₦}150,000$, what is the maximum number of such claims the insurer can cover in a year while still earning a profit of at least $\text{₦}20,000$?

Correct A. Final premium = ₦315,000; maximum claims = 1

B. Final premium = ₦300,000; maximum claims = 2

C. Final premium = ₦315,000; maximum claims = 0

D. Final premium = ₦330,000; maximum claims = 1

Correct Answer: A

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Question 5 View Details

A retailer buys 40 radios at $\text{₦}12,000$ each. He applies a markup of $25\%$ on the total cost and then offers a discount of $10\%$ on the marked‑up selling price to customers. What is the final selling price per radio after the discount?

A. ₦15,000

B. ₦13,800

Correct C. ₦13,500

D. ₦14,700

Correct Answer: C

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Question 6 View Details

A television has a marked price of ₦120,000. The seller first gives a $10\%$ discount, then adds a sales tax of $7.5\%$ on the discounted price. After tax, a promotional voucher of ₦5,000 is applied, but only if the total before the voucher exceeds ₦100,000. The consumer pays the final amount. Under the Consumer Protection Act, the consumer is entitled to a refund of the amount actually paid plus a penalty equal to $5\%$ of the original marked price because the TV was later found to be a refurbished model. How much total amount, in naira, should the consumer receive as refund including the penalty?

Correct A. 117100

B. 122100

C. 111100

D. 116500

Correct Answer: A

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Question 7 View Details

A washing machine is sold for ₦80,000 with a 2‑year warranty. After 18 months the machine fails. The consumer may either receive a brand‑new replacement costing ₦85,000 or a cash compensation equal to the current market value of the defective machine. The market value depreciates linearly at $15\%$ per year from the original price. In addition, the law adds a compensation of $10\%$ of the original price for inconvenience. If the market value is less than $70\%$ of the original price, the consumer is entitled to the full replacement cost instead. What amount, in naira, will the consumer receive as cash compensation?

A. 62000

Correct B. 70000

C. 85000

D. 76000

Correct Answer: B

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Question 8 View Details

A trader purchases 50 kg of rice at ₦200 per kilogram and sells the entire stock for a total revenue of ₦12,500. What is the trader's profit per kilogram, in naira?

A. 60

Correct B. 50

C. 40

D. 55

Correct Answer: B

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Question 9 View Details

A merchant can transport goods over a distance of 150 km using either a truck or a railway. The truck incurs a fixed cost of ₦5,000 per trip plus a variable cost of ₦120 per kilometre. The railway charges a fixed cost of ₦8,000 per shipment and a variable cost of ₦80 per kilometre, but offers a $5\%$ discount on the variable cost when the distance exceeds 100 km. Determine which mode of transport is cheaper and state the difference in cost, in naira.

A. Truck, 2000

Correct B. Railway, 3600

C. Truck, 3600

D. Railway, 4200

Correct Answer: B

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Question 10 View Details

An importer buys 200 units of a product abroad at a unit price of $45. The exchange rate is ₦460 per US dollar. Import duty is $12\%$ of the CIF value, and a surcharge of $5\%$ is applied on the duty amount. A handling fee of ₦2,500 per shipment is also charged. The importer wants to earn a profit margin of $20\%$ on the total landed cost. What should be the selling price per unit, in naira, rounded to the nearest naira?

A. 27836

Correct B. 27985

C. 27461

D. 30970

Correct Answer: B

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Question 11 View Details

A wholesaler purchases a batch of 200 units at a total cost of ₦500,000. He marks the goods up by (30\%\) above cost. He then offers a trade discount of (10\%\) on the marked price and, for early payment, an additional cash discount of (5\%\) on the discounted price. A retailer buys the whole batch, pays early, and intends to sell each unit at a price that gives him a profit of (12\%\) on his purchase price. What is the retailer's total profit in Naira?

A. 70200

B. 60000

Correct C. 66690

D. 74100

Correct Answer: C

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Question 12 View Details

A retailer buys 150 items for a total cost of ₦720,000. He incurs a fixed overhead of ₦48,000 for the month and pays a sales commission of (6\%\) on the total selling revenue. He wishes to set a uniform selling price per item so that his profit after covering overhead and commission equals (20\%\) of the total cost of the batch. What should be the selling price per item (in Naira)?

A. 6368.00

B. 6080.00

Correct C. 6468.09

D. 6538.01

Correct Answer: C

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Question 13 View Details

A transport company charges a freight rate of $₦150$ per ton for each of the first 200 km and $₦120$ per ton for each kilometre beyond 200 km. A fuel surcharge of $8\%$ is added to the freight charge. For a shipment of 45 tons over a distance of 350 km, the company also gives a volume discount: if the freight charge before surcharge exceeds $₦1,000,000$, a discount of $5\%$ is applied to the freight charge (before surcharge). Determine the total amount the client must pay (in Naira).

Correct A. 2216160

B. 2052000

C. 2552500

D. 2332800

Correct Answer: A

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Question 14 View Details

A logistics firm has a fixed daily operating cost of $₦250,000$ and a variable cost of $₦90$ per ton‑kilometre. It must transport goods over a distance of 180 km. To stay competitive, the firm wants the total cost per ton (including the allocation of the fixed cost) not to exceed $₦25,000$. What is the minimum load in tons the firm must transport to meet this target? Give your answer to two decimal places.

Correct A. 28.41

B. 35.71

C. 30.00

D. 25.00

Correct Answer: A

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Question 15 View Details

An importer plans to purchase 5,000 units of a product from abroad. The supplier's price is US\$12 per unit and the exchange rate is $₦460$ per US\$. Import duty is 12\% of the CIF (cost, insurance, freight) value, and a surcharge of 3\% is added on the duty amount. The importer also incurs a local handling fee of $₦8,000$ per shipment. After all costs, the importer wants to set a selling price that yields an 18\% profit margin on the total landed cost per unit. Determine the required selling price per unit in Naira, rounded to the nearest kobo.

Correct A. 7320.57

B. 7200.00

C. 7500.45

D. 7350.12

Correct Answer: A

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Question 16 View Details

A retailer orders 500 units of a product. The supplier's list price is $\,\text{₦}12{,}000$ per unit. The retailer receives a trade discount of 12% on the list price, then an additional promotional discount of 5% on the reduced price. If the retailer pays cash within 10 days, a further cash discount of 2% is allowed on the amount after the previous discounts. VAT of 7.5% is then added to the net amount payable. The retailer also incurs freight of $\text{₦}150{,}000$ and a handling charge equal to 1.2% of the net amount before VAT. Determine the minimum selling price per unit the retailer must set to achieve a profit margin of 20% on the total cost (including all charges and VAT).

A. ≈ ₦12,800 per unit

B. ≈ ₦13,600 per unit

C. ≈ ₦14,000 per unit

Correct D. ≈ ₦13,222 per unit

Correct Answer: D

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Question 17 View Details

A customer deposits $\text{₦}200{,}000$ in a bank that offers a nominal annual interest rate of 6% compounded quarterly. After 2 years the bank changes the nominal rate to 5% compounded monthly for the next 3 years. Calculate the amount in the account at the end of the 5‑year period and determine the average annual effective interest rate over the whole period.

A. Final amount ≈ ₦263,900; average annual effective rate ≈ 5.7%

B. Final amount ≈ ₦267,200; average annual effective rate ≈ 5.9%

Correct C. Final amount ≈ ₦261,678; average annual effective rate ≈ 5.5%

D. Final amount ≈ ₦259,400; average annual effective rate ≈ 5.3%

Correct Answer: C

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Question 18 View Details

Below is a draft memo that a junior officer has prepared for the sales department. Identify three breaches of standard business‑memo format or style, and rewrite the memo correctly, ensuring the proper heading order, appropriate tone, and correct use of the $\text{cc}$ line. --- To: All Sales Staff From: Mr. Ade, Sales Manager Date: 12/09/2024 Subject: New Sales Targets Hey team, Just a heads up - we need to push harder on the new product line. Management wants us to hit the numbers by the end of next month. Make sure you're on top of it. Thanks, Ade cc: Regional Manager, Finance ---

A. The memo should be rewritten as shown in the solution below.

Correct B. The memo should be rewritten as shown in the solution above.

C. The memo should be rewritten as shown in the attached document.

D. The memo should be rewritten as shown in the previous memo.

Correct Answer: B

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Question 19 View Details

A company plans a 5‑month advertising campaign using three media: TV, Radio and Social Media. The cost per thousand impressions (CPM) and maximum possible impressions for each medium are: - TV: CPM = $\text{₦}5{,}000$; max impressions = 500,000\n- Radio: CPM = $\text{₦}2{,}500$; max impressions = 600,000\n- Social Media: CPM = $\text{₦}1{,}000$; max impressions = 800,000\n The total advertising budget is $\text{₦}2{,}000{,}000$. The campaign must achieve at least 1,200,000 total impressions, and at least 30% of the total impressions must come from Social Media. Determine the allocation of the budget (in naira) to each medium that meets the constraints at the minimum possible total cost. State the number of impressions obtained from each medium and the total cost.

Correct A. Social Media: 800,000 impressions (₦800,000); Radio: 400,000 impressions (₦1,000,000); TV: 0 impressions (₦0); Total cost = ₦1,800,000.

B. Social Media: 800,000 impressions (₦800,000); Radio: 300,000 impressions (₦750,000); TV: 100,000 impressions (₦500,000); Total cost = ₦2,050,000.

C. Social Media: 800,000 impressions (₦800,000); Radio: 200,000 impressions (₦500,000); TV: 200,000 impressions (₦1,000,000); Total cost = ₦2,300,000.

D. Social Media: 600,000 impressions (₦600,000); Radio: 500,000 impressions (₦1,250,000); TV: 100,000 impressions (₦500,000); Total cost = ₦2,350,000.

Correct Answer: A

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Question 20 View Details

A retailer sells a product for $\text{₦}45{,}000$ per unit. The variable cost per unit consists of a purchase cost of $\text{₦}30{,}000$ and a sales commission equal to 5% of the selling price. Fixed monthly costs (rent, salaries, utilities) amount to $\text{₦}120{,}000$. What is the minimum number of units that must be sold each month to achieve a target profit of $\text{₦}150{,}000$? Also state the contribution‑margin ratio (as a percentage).

A. Minimum 21 units; contribution‑margin ratio = 28.33%

B. Minimum 20 units; contribution‑margin ratio = 30%

C. Minimum 18 units; contribution‑margin ratio = 33.33%

Correct D. Minimum 22 units; contribution‑margin ratio = 28.33%

Correct Answer: D

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Question 21 View Details

A Nigerian exporter invoices a sale of $50,000. The bank first deducts a commission of 1.5% on the invoice amount, then converts the remaining dollars to Naira at the official rate of $\text{₦}460$ per USD. After conversion, a customs duty of 5% is charged on the Naira amount, and finally a foreign‑exchange surcharge of 0.8% is applied on the amount remaining after duty. What total amount in Naira does the exporter receive after all deductions?

A. 21675200

Correct B. 21350072

C. 23597200

D. 21522250

Correct Answer: B

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Question 22 View Details

A retailer purchases 200 units of a product at $\text{₦}1,200$ each. He also pays a flat freight charge of $\text{₦}15,000$ and insurance equal to 2% of the total purchase cost (excluding freight). What is the total cost incurred by the retailer?

A. 255000

B. 275100

C. 260100

Correct D. 259800

Correct Answer: D

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Question 23 View Details

An online advertising campaign costs $\text{₦}3,500$ per thousand impressions (CPM). The campaign is expected to generate 120,000 impressions. Of these impressions, 4% result in clicks, and each click leads to a purchase with probability 6%. The profit earned from each purchase is $\text{₦}9,200$. Calculate the net profit (total profit from purchases minus the advertising cost).

A. 2671200

Correct B. 2229600

C. 1788000

D. 2649600

Correct Answer: B

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Question 24 View Details

A consumer buys a washing machine for $\text{₦}96,000$ that depreciates straight‑line over 8 years to a scrap value of zero. The machine develops a defect after 18 months, which is covered by a 2‑year warranty. The retailer offers a refund equal to the current book value minus a handling fee of 5% of the original price. What amount is refunded to the consumer?

A. 79200

B. 78000

Correct C. 73200

D. 74100

Correct Answer: C

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Question 25 View Details

A company issues a cheque of $\text{₦}250,000$ to a supplier. The bank charges a processing fee of 0.6% of the cheque amount plus a fixed fee of $\text{₦}1,200$. Because the company pays within 10 days, the supplier receives a 2% discount on the invoice amount (which equals the cheque amount). After the bank processes the cheque, the supplier's bank deducts a withholding tax of 5% on the amount after the discount but before the bank fees. What net amount does the supplier finally receive?

Correct A. 230050

B. 229800

C. 230080

D. 231250

Correct Answer: A

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