Practice neco model questions vol1 commerce 2022 Past Questions

Question 1 View Details

A manufacturing firm needs to raise exactly \(N500{,}000\) for expansion. It can obtain finance from three sources: a bank loan at 12% simple interest per annum (effective cost after a 30% tax shield), issuing new ordinary shares that require a dividend of 10% of the issue price, and using retained earnings, which carry no cost but the firm has only \(N100{,}000\) of retained earnings available. The firm must satisfy two conditions: (i) at least 30% of the total finance must be equity (shares plus retained earnings), and (ii) the loan amount cannot exceed \(N300{,}000\). Determine the amount to be raised from each source and compute the total annual cost of the finance package.

A. Loan = N250,000; Shares = N150,000; Retained earnings = N100,000; Total annual cost = N33,800

Correct B. Loan = N300,000; Shares = N100,000; Retained earnings = N100,000; Total annual cost = N35,200

C. Loan = N300,000; Shares = N120,000; Retained earnings = N80,000; Total annual cost = N36,400

D. Loan = N280,000; Shares = N110,000; Retained earnings = N110,000; Total annual cost = N34,600

Correct Answer: B

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Question 2 View Details

A supplier issues an invoice for \(N150{,}000\) with terms 2/10, n/30 (2% discount if paid within 10 days, otherwise the net amount is due in 30 days). The buyer pays the invoice on day 20. (a) State the amount the buyer actually pays. (b) Calculate the effective annual interest rate that the buyer incurs by forgoing the discount.

A. a) N147,000; b) Approximately 68.2% per annum

B. a) N150,000; b) Approximately 80.0% per annum

C. a) N148,500; b) Approximately 70.1% per annum

Correct D. a) N150,000; b) Approximately 74.5% per annum

Correct Answer: D

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Question 3 View Details

A trader insures his stock valued at \(N2{,}000{,}000\). The basic premium rate is 0.5% of the sum insured. Because the stock is considered high‑risk, a loading of 20% is added to the basic premium. A government tax of 5% is then applied to the premium after loading. The insurer offers a 10% discount on the total premium if the trader pays for three years in advance. Determine (a) the annual premium the trader must pay when he chooses the three‑year advance payment, and (b) the total amount saved compared with paying the undiscounted annual premium each year.

A. a) N10,800 per year; b) Total saving = N3,240

B. a) N11,880 per year; b) Total saving = N3,960

Correct C. a) N11,340 per year; b) Total saving = N3,780

D. a) N12,150 per year; b) Total saving = N4,050

Correct Answer: C

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Question 4 View Details

A wholesaler purchases a product at a cost price of \(N80\) per unit. He adds a markup of 25% to set the wholesale price. Retailers are offered a trade discount of 12% on the wholesale price, and a cash discount of 2% if payment is made within 15 days of invoice. Determine the effective price per unit the retailer pays when the cash discount is taken, and compute the wholesaler's profit margin (percentage on cost) on that transaction.

A. Effective price = N85.12 per unit; Profit margin ≈ 7.0%

B. Effective price = N87.60 per unit; Profit margin ≈ 8.5%

Correct C. Effective price = N86.24 per unit; Profit margin ≈ 7.8%

D. Effective price = N84.80 per unit; Profit margin ≈ 6.0%

Correct Answer: C

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Question 5 View Details

An advertising agency plans a TV campaign targeting an audience of \(1{,}200{,}000\) people. The objective is to achieve a Gross Rating Point (GRP) of 250. Each TV spot reaches 4% of the target audience. The cost of one spot is \(N45{,}000\). If more than 20 spots are purchased, each additional spot beyond the 20th receives a 10% discount on its price. Determine (a) the minimum number of spots required to meet the GRP target, (b) the total cost of the campaign, and (c) the average cost per GRP achieved.

A. a) 70 spots; b) Total cost = N2,970,000; c) Average cost per GRP ≈ N11,200

B. a) 63 spots; b) Total cost = N2,800,000; c) Average cost per GRP ≈ N11,111

Correct C. a) 63 spots; b) Total cost = N2,641,500; c) Average cost per GRP ≈ N10,493

D. a) 58 spots; b) Total cost = N2,310,000; c) Average cost per GRP ≈ N10,000

Correct Answer: C

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Question 6 View Details

A shop incurs fixed costs of \(150{,}000\) naira per month. The variable cost per unit is \(250\) naira and the selling price per unit is \(400\) naira. How many units must be sold each month to break even?

A. 800

B. 1200

C. 1500

Correct D. 1000

Correct Answer: D

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Question 7 View Details

A consumer bought a television for \(200{,}000\) naira with a 2‑year warranty. After 18 months the TV failed. The seller offers two options: (i) keep the TV and pay \(15{,}000\) naira for any future repair after the warranty expires; (ii) replace it now with a newer model that costs 20% more than the original price and carries a 3‑year warranty. The probability that a TV fails in any year is 5% for the original model and 2% for the newer model. Assuming the consumer wants to minimise the expected total cost over the next 3 years from the date of purchase, which option should he choose?

A. Replace with the newer model and extend the warranty

B. Keep the original TV and pay the repair cost now

Correct C. Keep the original TV and repair if needed

D. Replace with the newer model

Correct Answer: C

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Question 8 View Details

A business needs to raise \(5{,}000{,}000\) naira. It can obtain finance from three sources: a bank loan at 12% p.a. (maximum 40% of total), equity at 18% p.a. (at least \(1{,}000{,}000\) naira must be raised this way), and a bond issue at 10% p.a. (maximum \(2{,}000{,}000\) naira). What mix of the three sources minimises the weighted average cost of capital, and what is that minimum average cost (expressed as a percentage)?

Correct A. 12.4

B. 11.9

C. 12.7

D. 13.1

Correct Answer: A

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Question 9 View Details

A retailer purchases 500 units of a product at \(8{,}000\) naira each. He adds a 30% markup to set the selling price, then offers a 15% seasonal discount on that price, and finally a sales tax of 5% is applied to the discounted price. The retailer also incurs a fixed overhead of \(200{,}000\) naira for the batch. Determine (a) the final price per unit the consumer pays, and (b) the retailer's overall profit or loss after selling all units.

A. ₦8,900 per unit; ₦300,000 loss

Correct B. ₦9,282 per unit; ₦441,000 profit

C. ₦9,150 per unit; ₦380,000 profit

D. ₦9,500 per unit; ₦500,000 profit

Correct Answer: B

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Question 10 View Details

An insurance company calculates a motor‑vehicle premium as follows: base premium = 5% of the insured value; a loading of 20% is added for high‑risk drivers; a no‑claim‑bonus (NCB) discount of 10% is applied to the premium after loading if the driver had no claims in the previous year; finally, a tax of 2.5% is levied on the discounted premium. For a car insured at \(3{,}000{,}000\) naira, what is the final premium payable by a high‑risk driver who enjoyed the NCB?

A. 165750

B. 138375

C. 169125

Correct D. 166050

Correct Answer: D

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Question 11 View Details

A transport company charges a base rate of \(\text{₦}150\) per kilometre for the first 200 km and \(\text{₦}120\) per kilometre for each kilometre beyond 200 km. A fuel surcharge of 8% of the base charge is added, together with a fixed loading fee of \(\text{₦}5,000\) per consignment. For a particular shipment the total invoice amount was \(\text{₦}78,872\). Determine the total distance travelled for that shipment (in km).

A. 560 km

B. 600 km

C. 480 km

Correct D. 520 km

Correct Answer: D

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Question 12 View Details

Three partners A, B and C invest capital of \(\text{₦}120,000\), \(\text{₦}80,000\) and \(\text{₦}100,000\) respectively for one year. The firm earns a net profit of \(\text{₦}84,000\) before interest. The partnership agreement states that interest on capital is charged at 10% per annum, a short‑term loan of \(\text{₦}50,000\) is taken at 12% interest and this interest is deducted from profit before distribution, and the remaining profit is divided in the ratio of the partners' capital contributions. How much profit does partner B receive?

Correct A. 20800

B. 24000

C. 22400

D. 19200

Correct Answer: A

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Question 13 View Details

A wholesaler buys a product at \(\text{₦}2,500\) per unit. Monthly overhead is \(\text{₦}150,000\) and a handling cost of \(\text{₦}300\) per unit sold is incurred. The selling price is set with a 40% markup on the cost price, but a seasonal discount of 10% on the selling price is given for orders exceeding 200 units. What is the minimum number of units that must be sold in a month to achieve a profit of at least \(\text{₦}100,000\)?

Correct A. 715

B. 720

C. 730

D. 710

Correct Answer: A

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Question 14 View Details

A warehouse has two storage zones. Zone A (low‑cost) can hold up to 8,000 m³ and charges \(\text{₦}2\) per m³ per month plus a fixed security fee of \(\text{₦}12,000\) per month if any goods are stored there. Zone B (high‑cost) can hold up to 5,000 m³ and charges \(\text{₦}5\) per m³ per month with the same \(\text{₦}12,000\) monthly security fee when used. An external temporary storage can be rented at \(\text{₦}8\) per m³ per month with no fixed fee, but only up to 3,000 m³. A retailer must store 10,000 m³ of goods for six months. Determine how many cubic metres should be stored in each zone (including external) to minimise the total cost, and state that minimum total cost.

A. Zone A: 6000 m³, Zone B: 3000 m³, External: 1000 m³; Minimum total cost = ₦354,000

B. Zone A: 8000 m³, Zone B: 2000 m³, External: 0 m³; Minimum total cost = ₦300,000

Correct C. Zone A: 8000 m³, Zone B: 0 m³, External: 2000 m³; Minimum total cost = ₦264,000

D. Zone A: 7000 m³, Zone B: 2000 m³, External: 1000 m³; Minimum total cost = ₦336,000

Correct Answer: C

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Question 15 View Details

A company faces an annual demand of 12,000 units. The ordering cost is \(\text{₦}4,500\) per order. Holding cost is 25% of the unit cost per year. The supplier offers quantity discounts as follows:\n- 1-1,000 units: unit cost \(\text{₦}1,200\)\n- 1,001-3,000 units: unit cost \(\text{₦}1,150\)\n- 3,001-6,000 units: unit cost \(\text{₦}1,100\)\n- >6,000 units: unit cost \(\text{₦}1,050\)\nDetermine the order quantity that minimises the total annual cost (ordering + holding + purchase) and compute that minimum total cost.

Correct A. Order quantity = 6,001 units; Minimum total cost ≈ ₦13,396,630

B. Order quantity = 3,001 units; Minimum total cost ≈ ₦13,800,000

C. Order quantity = 5,000 units; Minimum total cost ≈ ₦13,450,000

D. Order quantity = 6,500 units; Minimum total cost ≈ ₦13,380,000

Correct Answer: A

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Question 16 View Details

An insurance company calculates the premium for a motor policy as follows: the base premium is increased by a risk loading equal to \(20\%\) of the base premium; a tax of \(5\%\) is then applied to the sum of the base premium and the risk loading; finally, an agent's commission of \(2\%\) is added on the amount after tax. If the customer pays a total premium of ₦120 000, what is the base premium (in naira)?

A. 112000

B. 98039

Correct C. 93371

D. 94118

Correct Answer: C

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Question 17 View Details

A logistics company charges a base freight rate of \(\text{₦}150\) per kilometre for the first 200 km and \(\text{₦}120\) per kilometre for each kilometre thereafter. A fuel surcharge of \(8\%\) of the base freight cost and a handling fee of \(\text{₦}5\,000\) are added to the charge. If a customer was quoted a total charge of \(\text{₦}210\,000\), what total distance (in km) was the shipment transported?

Correct A. 1532

B. 1530

C. 1265

D. 1570

Correct Answer: A

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Question 18 View Details

A retailer orders a product with an annual demand of 12 000 units. The ordering cost is \(\text{₦}2\,500\) per order and the holding cost is 25 % of the unit cost per year. The supplier offers two price tiers: \(\text{₦}150\) per unit for orders of 500 units or less, and \(\text{₦}135\) per unit for orders of 501 units or more. Determine the order quantity that minimises the total annual cost and state that minimum cost (in naira).

A. 1500 units, ₦1600000

Correct B. 1334 units, ₦1665000

C. 1200 units, ₦1650000

D. 1400 units, ₦1700000

Correct Answer: B

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Question 19 View Details

A company's income statement shows sales revenue of \(\text{₦}5\,000\,000\). Cost of goods sold is 60 % of sales. Operating expenses consist of salaries of \(\text{₦}400\,000\), a variable component equal to 5 % of sales, and depreciation of \(\text{₦}150\,000\). Interest expense equals 2 % of the loan balance (which is unknown). Net profit before tax is \(\text{₦}800\,000\) and tax is 30 % of profit before tax. What is the loan balance (in naira)?

A. 25000000

B. 18000000

C. 15000000

Correct D. 20000000

Correct Answer: D

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Question 20 View Details

A trader purchases 200 kg of cocoa at \(\text{₦}1\,200\) per kg. He pays a customs duty of 5 % on the purchase value and a freight charge of \(\text{₦}30\,000\). He sells the cocoa at \(\text{₦}1\,500\) per kg. What is his profit (in naira)?

A. 15000

B. 12000

Correct C. 18000

D. 30000

Correct Answer: C

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Question 21 View Details

An entrepreneur buys 12 metres of cloth at ₦150 per metre, 8 kilograms of beans at ₦200 per kilogram, and 5 litres of oil at ₦250 per litre. What is the average cost per unit (consider each metre, kilogram or litre as one unit) of the total purchase?

Correct A. 186

B. 190

C. 200

D. 184

Correct Answer: A

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Question 22 View Details

A Nigerian exporter receives an order for 10,000 units. His cost per unit is ₦500. He wants to earn a profit of 25 % on his total cost. The buyer will pay within 30 days and, in return, the exporter offers a 2 % discount on the invoice amount. After the discount, a freight charge of 5 % of the discounted amount is added to the buyer's payment. What minimum invoice amount should the exporter state so that, after the discount and freight charge, he receives the amount required to cover his cost and desired profit?

A. 6100000

Correct B. 6073850

C. 6000000

D. 6150000

Correct Answer: B

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Question 23 View Details

Three partners A, B and C invest ₦200,000, ₦300,000 and ₦500,000 respectively in a business for one year. The partnership agreement provides interest on capital at 10 % per annum, and the remaining profit is shared in the ratio of their capital contributions. If the net profit after paying the interest is ₦180,000, how much does each partner receive in total (interest plus profit share)?

A. 50000, 80000, 140000

B. 56000, 84000, 150000

C. 56000, 90000, 140000

Correct D. 56000, 84000, 140000

Correct Answer: D

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Question 24 View Details

A borrower takes a loan with a face value of ₦1,200,000. The loan is discounted at 12 % per annum payable in advance, and a processing fee of 2 % of the loan amount is also charged. The loan is to be repaid in equal monthly installments over 2 years. What is the amount of each monthly installment?

Correct A. 50000

B. 37000

C. 51000

D. 48000

Correct Answer: A

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Question 25 View Details

A fixed deposit of ₦500,000 earns 8 % per annum compounded semi‑annually for 3 years. After 18 months, the depositor withdraws half of the balance and reinvests it at 9 % per annum compounded quarterly for the remaining period. What is the total amount in the account at the end of the 3‑year term?

A. 630000

B. 645000

Correct C. 637711

D. 620500

Correct Answer: C

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