POST UTME COVENANT UNIVERSITY 2018 Commerce | Objective

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Question 1
A company is considering the purchase of a new machine that costs ₦1,500,000. The machine is expected to last for 5 years and reduce production costs by ₦200,000 per year. If the company's cost of capital is 12% per annum, what is the net present value (NPV) of the machine?
Correct A. ₦750,000
B. ₦1,000,000
C. ₦1,200,000
D. ₦1,500,000

Correct Answer: A

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Question 2
A sole trader, Mr. A, has a business that generates an average annual profit of ₦500,000. If Mr. A's marginal tax rate is 25%, what is his average annual tax liability?
Correct A. ₦125,000
B. ₦150,000
C. ₦200,000
D. ₦250,000

Correct Answer: A

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Question 3
A consumer protection agency has received a complaint from a customer who was sold a defective product. The product was sold for ₦50,000, and the customer is seeking a refund. If the product's market value is ₦30,000, what is the amount of compensation the customer is entitled to?
A. ₦10,000
B. ₦20,000
Correct C. ₦30,000
D. ₦40,000

Correct Answer: C

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Question 4
A company has a production process that involves the use of a machine that costs ₦200,000 to purchase and ₦50,000 per year to maintain. If the machine is expected to last for 5 years and produce 10,000 units per year, what is the total cost of production for the first year?
A. ₦250,000
Correct B. ₦300,000
C. ₦350,000
D. ₦400,000

Correct Answer: B

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Question 5
A bank has a loan portfolio that consists of 80% fixed-rate loans and 20% variable-rate loans. If the average interest rate on the fixed-rate loans is 12% per annum and the average interest rate on the variable-rate loans is 15% per annum, what is the average interest rate on the entire loan portfolio?
A. 12%
Correct B. 13%
C. 14%
D. 15%

Correct Answer: B

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Question 6
A company's financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP). Which of the following statements is true about the accounting equation?
Correct A. Assets = Liabilities + Equity
B. Assets = Liabilities - Equity
C. Assets = Equity - Liabilities
D. Liabilities = Assets + Equity

Correct Answer: A

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Question 7
A sole trader's business is registered under the sole trader's name. What is the primary advantage of this type of business registration?
Correct A. Easy to set up and maintain
B. Limited liability protection
C. Flexibility in decision-making
D. No need for formal accounting records

Correct Answer: A

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Question 8
A company's board of directors has decided to issue new shares to raise capital for a new project. What is the primary benefit of this decision?
A. Increased ownership and control
B. Improved financial stability
Correct C. Enhanced market value and reputation
D. Reduced debt and liability

Correct Answer: C

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Question 9
A business is considering the purchase of a new machine to increase production capacity. What is the primary factor to consider when evaluating the cost-benefit analysis?
A. Initial purchase price and maintenance costs
B. Expected lifespan and residual value
Correct C. Opportunity costs and alternative uses
D. Market demand and competition

Correct Answer: C

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Question 10
A company's marketing strategy involves the use of social media platforms to reach its target audience. What is the primary benefit of this approach?
A. Increased brand awareness and recognition
Correct B. Improved customer engagement and loyalty
C. Enhanced market research and analysis
D. Reduced advertising costs and expenses

Correct Answer: B

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Question 11
In a perfectly competitive market, the supply curve is horizontal and the demand curve is downward-sloping. What is the effect of an increase in the price of a complementary good on the supply curve?
A. The supply curve shifts to the left.
Correct B. The supply curve shifts to the right.
C. The supply curve remains unchanged.
D. The supply curve shifts downward.

Correct Answer: B

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Question 12
A firm's production function is given by Q = 2L^0.5K^0.5. If the price of labor increases by 20%, what is the effect on the firm's output?
A. Output increases by 10%.
Correct B. Output decreases by 10%.
C. Output remains unchanged.
D. Output increases by 20%.

Correct Answer: B

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Question 13
A firm's cost function is given by C = 100 + 2L + 3K. If the price of labor increases by 15% and the price of capital increases by 10%, what is the effect on the firm's total cost?
A. Total cost increases by 12.5%.
B. Total cost increases by 15%.
Correct C. Total cost increases by 17.5%.
D. Total cost remains unchanged.

Correct Answer: C

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Question 14
A firm's revenue function is given by R = 100P^2. If the price of the firm's product increases by 20%, what is the effect on the firm's revenue?
A. Revenue increases by 10%.
B. Revenue increases by 20%.
Correct C. Revenue increases by 40%.
D. Revenue remains unchanged.

Correct Answer: C

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Question 15
A firm's profit function is given by Φ = R - C. If the price of the firm's product increases by 15% and the price of labor increases by 10%, what is the effect on the firm's profit?
A. Profit increases by 12.5%.
B. Profit increases by 15%.
Correct C. Profit increases by 17.5%.
D. Profit remains unchanged.

Correct Answer: C

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Question 16
A company's marketing strategy involves a mix of advertising, sales promotions, and public relations. Which of the following is a key advantage of using a mix of these strategies?
A. Increased brand awareness
B. Improved customer engagement
Correct C. Enhanced product differentiation
D. Better return on investment

Correct Answer: C

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Question 17
A warehouse manager wants to optimize storage space by using a first-in-first-out (FIFO) inventory system. What is the primary benefit of this approach?
A. Reduced storage costs
Correct B. Improved inventory turnover
C. Enhanced product quality
D. Increased storage capacity

Correct Answer: B

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Question 18
A company is considering exporting its products to a foreign market. Which of the following is a key factor to consider when evaluating the feasibility of this decision?
Correct A. Market demand and competition
B. Trade agreements and regulations
C. Currency exchange rates and inflation
D. Transportation costs and logistics

Correct Answer: A

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Question 19
A bank is considering offering a new credit card product to its customers. Which of the following is a key consideration when evaluating the potential profitability of this product?
A. Interest rates and fees
Correct B. Credit risk and default rates
C. Marketing and advertising costs
D. Customer acquisition and retention

Correct Answer: B

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Question 20
A company is considering purchasing a liability insurance policy to protect against potential lawsuits. Which of the following is a key benefit of this type of insurance?
Correct A. Reduced financial risk
B. Improved reputation and brand image
C. Enhanced customer trust and loyalty
D. Increased competitiveness in the market

Correct Answer: A

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Question 21
The concept of 'Gross Domestic Product' (GDP) is a measure of a nation's economic activity, but it has some limitations. Which of the following is NOT a limitation of GDP?
A. It does not account for income inequality
B. It does not account for the value of unpaid household work
C. It does not account for the value of illegal activities
Correct D. It does not account for the value of foreign aid

Correct Answer: D

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Question 22
A firm's marketing mix consists of four Ps: product, price, promotion, and place. Which of the following is NOT one of the four Ps?
A. Product
B. Price
C. Promotion
Correct D. Packaging

Correct Answer: D

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Question 23
A firm's supply chain management involves the coordination of activities across the entire value chain. Which of the following is a key benefit of supply chain management?
A. Reduced costs
B. Improved quality
C. Increased efficiency
Correct D. All of the above

Correct Answer: D

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Question 24
A firm's financial management involves the planning, organizing, and controlling of financial resources. Which of the following is a key objective of financial management?
A. To maximize profits
B. To minimize costs
C. To increase market share
Correct D. To increase shareholder value

Correct Answer: D

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Question 25
A firm's human resource management involves the planning, organizing, and controlling of human resources. Which of the following is a key benefit of human resource management?
A. Improved productivity
B. Increased employee satisfaction
C. Reduced turnover
Correct D. All of the above

Correct Answer: D

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