neco model questions vol1 2024 commerce | Essay

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Question 1 View Details
A small town in Nigeria has recently witnessed the opening of an online marketplace that enables local artisans to sell their products nationwide. The local traders are divided in their opinion about the impact of this development.
Question Parts
(a)
Explain three fundamental functions of commerce and illustrate how the online marketplace facilitates each function for the local artisans.
(b)
Analyse two potential challenges that the local traders may face because of the shift to e‑commerce and suggest one practical measure to mitigate each challenge.
(c)
Considering the above, evaluate whether the introduction of the online marketplace is likely to improve the overall economic well‑being of the town in the next five years. Justify your answer with reference to the functions and challenges discussed.
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Question 2 View Details
The table below shows Nigeria’s recorded export and import values for three consecutive years. | Year | Exports (₦ billions) | Imports (₦ billions) | |------|----------------------|----------------------| | 2019 | 2.5 | 3.2 | | 2020 | 2.8 | 3.6 | | 2021 | 3.1 | 3.4 | Using this information, answer the questions that follow.
Question Parts
(a)
Calculate the percentage change in exports and in imports from 2019 to 2021.
(b)
Determine the trade balance for each year and state whether it is a surplus or a deficit.
(c)
Discuss the trend in Nigeria’s terms of trade over the period and recommend one policy measure that could help improve the trade position.
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Question 3 View Details
A small retailer in Lagos sells three types of household goods: ceramic plates, wooden chairs and cotton towels. The following information is given for each product: - Purchase price per unit: plates ₦1,200, chairs ₦3,500, towels ₦800. - Selling price per unit: plates ₦1,800, chairs ₦5,000, towels ₦1,200. - Variable overhead per unit (apart from purchase price): plates ₦100, chairs ₦150, towels ₦80. - Fixed monthly overhead (rent, salaries, utilities, etc.): ₦150,000. - Discount policy: if the monthly sales of a product exceed 200 units, a 10 % discount on the selling price is granted on **all** units of that product for the month. Answer the following:
Question Parts
(a)
Calculate the contribution margin per unit for each product.
(b)
Determine the number of units of each product that must be sold in a month to cover the fixed overhead, assuming no discount is applied.
(c)
If the retailer sells 250 plates in a month and the discount is applied, recalculate the contribution margin per plate and the new break‑even quantity for plates.
(d)
Based on the above calculations, advise which product the retailer should prioritize to maximise profit, taking the discount effect into account.
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Question 4 View Details
A Nigerian cocoa farmer exports one tonne of cocoa beans to the European Union. The following data apply: - Export price: €1,200 per tonne. - Current exchange rate: 1 € = ₦560. - Shipping cost (paid in Naira): ₦30,000 per tonne. - Export tax: 5 % of the export value (calculated in Naira). - Foreign‑exchange surcharge: 2 % of the converted export value. - The EU imposes an import duty of 10 % on the export price (paid by the importer, therefore does not affect the farmer’s receipts). - Domestic market price of cocoa beans: ₦800,000 per tonne. - Production cost for the farmer: ₦600,000 per tonne. Answer the following questions:
Question Parts
(a)
Calculate the total foreign‑exchange earnings in Naira from exporting one tonne, after deducting export tax, the foreign‑exchange surcharge and shipping cost.
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Question 5 View Details
A retail shop sells a single product. For the month of March the following data are recorded: - Selling price per unit: ₦2,500 - Variable cost per unit (cost of goods sold): ₦1,600 - Fixed costs (rent, salaries, utilities): ₦540,000 - Average monthly sales volume: 350 units Using the above information, answer the questions that follow.
Question Parts
(a)
Determine the gross profit earned on each unit and express the gross profit margin as a percentage of the selling price.
(b)
Calculate the break‑even sales volume in units for the month.
(c)
If the variable cost per unit rises by 10% because of a supplier price increase, recalculate the break‑even volume. State the percentage increase in break‑even units compared with part (b).
(d)
The retailer is considering two alternatives to keep profit levels while reducing the break‑even volume: (i) Increase the selling price by 5% while keeping costs unchanged. (ii) Keep the selling price unchanged but reduce the variable cost by 5% through efficiency measures. For each alternative, compute the new break‑even volume and recommend which alternative is more effective in lowering the break‑even units.
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Question 6 View Details
A wholesale trader purchases 800 units of an electronic gadget at a unit price of ₦1,200. The supplier offers a 2% trade discount on the invoice amount and a further 1% cash discount if payment is made within 10 days. During the month, 5% of the units are found to be defective and are returned for a full refund (including all discounts). The trader intends to sell the remaining good units at a markup of 30% on the net cost (after discounts and returns) and incurs fixed overheads of ₦150,000 for the month.
Question Parts
(a)
Calculate the net cost per unit after taking into account the trade discount, the cash discount (assuming payment is made within the discount period) and the returns of defective units.
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Question 7 View Details
A group of three entrepreneurs – Ada, Bayo and Chidi – plan to start a manufacturing venture. Ada will contribute ₦30 million, Bayo ₦20 million and Chidi ₦10 million. Ada wants full control over day‑to‑day decisions, Bayo is risk‑averse and prefers limited personal liability, while Chidi is interested mainly in profit sharing and is willing to accept moderate risk. They are considering the following forms of business organisation in Nigeria: a partnership, a private limited company (Ltd) and a cooperative society.
Question Parts
(a)
Identify three major forms of business organisation in Nigeria and state one key characteristic of each.
(b)
Based on the entrepreneurs’ preferences and capital contributions, recommend the most suitable form of organisation for the venture. Justify your recommendation with at least four relevant criteria.
(c)
Outline the procedural steps required to register a private limited company with the Corporate Affairs Commission (CAC) in Nigeria and discuss the principal ongoing compliance obligations of such a company.
(d)
Explain how the chosen form (private limited company) influences the owners’ personal liability and the venture’s ability to obtain finance.
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Question 8 View Details
Alpha Manufacturing Ltd, a medium‑size firm, recorded an earnings before interest and tax (EBIT) of ₦30 million for the last financial year. The company’s current book‑value equity is ₦120 million and it has no existing debt. To fund a plant‑expansion project, Alpha needs an additional ₦150 million. The management is considering two financing alternatives:
Question Parts
(a)
List four major sources of finance for businesses and classify each as internal or external.
(b)
Using the data below, compute the weighted average cost of capital (WACC) for each of the two financing options. Show all steps. Option 1: 60 % bank loan at 12 % interest (tax rate 30 %) and 40 % retained earnings (cost of retained earnings assumed 0 %). Option 2: 50 % new equity at a required return of 15 % and 50 % debentures at 10 % interest (tax rate 30 %).
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