Neco Model Questions Vol1 2024 Commerce Question 3

Practice essay / theory question 3 from the 2024 Neco Model Questions Vol1 Commerce examination. This question covers Home Trade .

Neco Model Questions Vol1 2024 Commerce Essay / Theory
Topic: Home Trade
Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2024 • COMMERCE • essay

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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About This Question

This is Neco Model Questions Vol1 2024 Commerce Question 3. It is one of the essay questions from the 2024 Neco Model Questions Vol1 Commerce examination.

The question covers Home Trade .

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