A wholesaler purchases goods with a list price of ₦1,200,000. The supplier gives a trade discount of 10 % and, if payment is made within 15 days, an additional cash discount of 2 % on the discounted amount. Otherwise the net amount is payable in 30 days with no further discount. The wholesaler marks up the goods by 25 % on his cost (after all discounts). He sells the goods to customers on credit for 30 days but offers a 3 % cash discount for payment within 10 days, and all customers take this discount.

(a) Calculate the wholesaler's gross profit.
(b) Determine the effective annual rate of return (as a percentage) on the cash discount received from the supplier, assuming a 360‑day year.

Question

A wholesaler purchases goods with a list price of ₦1,200,000. The supplier gives a trade discount of 10 % and, if payment is made within 15 days, an additional cash discount of 2 % on the discounted amount. Otherwise the net amount is payable in 30 days with no further discount. The wholesaler marks up the goods by 25 % on his cost (after all discounts). He sells the goods to customers on credit for 30 days but offers a 3 % cash discount for payment within 10 days, and all customers take this discount.

(a) Calculate the wholesaler's gross profit.
(b) Determine the effective annual rate of return (as a percentage) on the cash discount received from the supplier, assuming a 360‑day year.

Accepted Answer

Gross profit = ₦224,910; effective annual rate ≈ 49.0 %

Waec Model Questions Vol1 2023 Commerce Question 40

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