Quiz 2 of 14

2020 Commerce WAEC Theory Past Questions

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(1) A sole proprietor has been advised to advertise her business in order to increase sales.

(a) (i)    List four advertising media she could use.

Answer

(ii)   State four factors she could consider in the choice of a medium.

Answer

  1. Nature of Product: The medium should fit the nature of the product.
  2. The audience: The target audience should be considered if the advertisement is to make any impact.
  3. Frequency: This is the number of times an advertisement is delivered through a particular medium.
  4. Cost of media: The cost should be considered in relation to the amount of funds available and the circulation of the media.
  5. The flexibility of a medium: A medium should offer considerable flexibility in terms of the geographical market covered and the time of message presented.
  6. Media circulation: The media to be selected should read the desired type of market with minimum waste.
  7. Media effectiveness: The efficiency and effectiveness of the media in making the required impact on the audience should be considered.

 

(b)    State four advantages of advertising to her business.

Answer

  1. It educates the customers on the use of the products.
  2. It leads to an increase in demand which in turn brings about an increase in sales.
  3. Advertising helps to inform customers about the existence of a new product.
  4. It brings about healthy competition among producers of similar goods.
  5. It helps to build a good corporate image for the organisation.
  6. It makes mass production of goods possible as markets are being created.
  7. Effective advertising aids mail order business.

(a)     State four functions of a Cartel.

Answer

  1. More profit is generated through restrictions of output and an increase in price.
  2. A cartel was established so that members can maintain their market shares by regulating output.
  3. The output of members is restricted in order to reduce or eliminate wastages.
  4. The price of their products is artificially increased.
  5. The coming together of the members to agree on output and common prices reduces the fear of competition.

 

(b)     Explain three advantages and three disadvantages of public enterprises.

Answer

The advantages of public enterprises are:

  1. Public enterprises can sue and be sued in their names and can enter into a contract on their own.
  2. Revenue can be generated by government from dividends, rates, and fees due to its participation in public enterprises.
  3. Death or retirement of any member cannot bring the organisation to an end. It has perpetual existence.
  4. The economy of a nation is regulated by ensuring the employment of its citizens.
  5. The government makes funds available for large-scale investments because of its large financial resources.
  6. Most social and essential services are provided at a subsidized rate to the public.
  7. By establishing public enterprises, wasteful duplication is avoided.

     The disadvantages of public enterprises are:

  1. Red tapism and bureaucratic tendency might cause delays in decision-making process.
  2. The cost of providing infrastructure facilities is very high.
  3. There is a high level of corruption and embezzlement of funds by the people in charge.
  4. Government enterprises are usually inefficient in operation and management when compared with private businesses.
  5. Most public enterprises are run at a loss because they are not profit-oriented.
  6. Lack of competition encourages inefficiency in operation. They are monopolistic in nature.

(a)     List six credit instruments used in business transactions

Answer

 

(b)     Mr. Sylva is considering hire purchase as a source of finance for his business operations. State four advantages and three disadvantages of this source of finance.

Answer

The advantages of hire purchase are:

  1. Hire purchase helps to increase his turnover.
  2. It affords him the opportunity to acquire expensive goods.
  3. It helps to increase his standard of living.
  4. It helps him to dispose of expensive and durable goods quickly.
  5. Higher prices are charged for goods sold under this condition.
  6. Mr. Sylva will retain ownership of the goods he sold.

The disadvantages are:

  1. There might be problems of irrecoverable debts to Mr. Sylva.
  2. He will suffer the cost of keeping additional records.
  3. There might be unnecessary delays from unscrupulous customers in making payments.
  4. It might lead him to have court cases with some of his customers.
  5. His capital may be tied down between the time of sales and payment.

(a)     Explain four factors to be considered in setting up a retail business.

 Answer

  1. Capital: The total money available to manage and finance the business effectively must be considered.
  2. Nature of goods: Some goods are perishable while others are not such as technical or industrial goods.
  3. Source of supplies: The retailer has to take decisions on how and where to replenish stock to reduce the cost of transportation.
  4. Pricing policy: A decision has to be taken whether to charge low or high prices depending on the type of goods.
  5. Location of the shop: The business has to be located where there are potential customers and where they can easily be found.
  6. Terms of payment: The retailer should consider whether to offer payment or not and to whom.
  7. Experience: The retailer needs to know and have the technical know-how on how to run the business before embarking on it.

 

(b)     State how the government uses the following to regulate business:

  1. Registration of business name
  2. Patent
  3. Trademark
  4. Copyright

       Answer

  1. Registration of business: Businesses such as partnership, limited liability companies can only commence business if they are registered with Corporate Affairs Commission. Public limited liability companies are given, in addition, a certificate of trading after receiving a certificate of incorporation before they can start a real business.
  2. Patent: This is an exclusive right granted to an inventor to be the only person to make, use or sell a product or an invention. The possession of patent rights gives the holder some degree of monopoly power over his own invention.
  3. Trade Mark: This is a mark or name identified with some goods which have been registered under the Trade Mark Act and cannot be used by any other producer. e.g Close-up, Omo, Joy soap, Lux, etc.
  4. Copyright: This is a right given to a product of literary work or musical composition. It is an exclusive right given to an author, composer, or artist to publish and sell his work. His work will not be allowed to be copied without permission.

(a)     State four functions of a Stock Exchange.

Answer

  1. The market serves as a place where sales and purchases of existing securities take place.
  2. The prices of stock can be determined through the price mechanism of demand and supply.
  3. The market ensures that all contracts and transactions are subjected to the rules and regulations.
  4. It helps to provide long-term funds to finance capital projects for the government.
  5. The stock market provides an avenue for people to invest their surplus funds to purchase securities.
  6. The market facilitates the transfer of securities from one investor to another.
  7. The market helps to provide investment and professional advisory services to the participants in the market.

 

(b)      Explain the following types of securities traded on the Stock Exchange:

  1. Debentures
  2. Bonds
  3. Shares
  4. Stock

Answer

  1. Debentures: It represents the document that acknowledges the indebtedness of a company. They are secured on the assets of the company. Debentures have a fixed rate of interest.
  2. Bonds: They are fixed interest investment securities issued for a long-term duration and then have coupon rates. Government issues bonds as a way of raising funds from the stock market. It has a date of redemption whereby the issuer pays the nominal value of the bond to the holder.
  3. Shares: This is the interest of a shareholder in a company measured by a sum of money. Shares are the unit of the capital of a company allocated to individuals. Shares can be divided into ordinary and preference shares.
  4. Stock: It is a collection of shares into a bundle or consolidated shares. Stocks are usually quoted per N100 nominal value but fractions of it may be bought and sold.

(a)     State five functions of an Export Promotion Council.

Answer

The functions of an Export Promotion Council are:

  1. Nigerian Export Promotion Council introduces measures to increase the volume and quality of goods to be exported.
  2. It also provides information about Nigerian exports in the international market.
  3. It helps to review existing products for export and also set out procedure for exportation.
  4. All expenses must obtain and prepare all necessary documents through the help of the council.
  5. It organises seminars and workshops on export management for people engaging in international trade.
  6. The council prepares and issues out publications containing information about the various activities of the council.

 

(b)     Outline five roles performed by the Customs and Exercise Authority towards the growth of Commerce.

Answer

The roles performed by the Customs and Exercise Authority towards the growth of Commerce are:

  1. The Custom Authority prevents smugglers from bringing or taking goods in or out of the country.
  2. It is the duty of the Customs Authority to compile statistics on import and export.
  3. They help to collect taxes on imported, exported, and locally made goods.
  4. Custom Authority helps to monitor and supervise bonded warehouses where goods are stored until the duties are paid.
  5. They help to generate revenue for the government in form of import and export duties.
  6. Custom Authority provides quarantine service for imported animals and plants that have diseases so as to prevent the spread of diseases.

Emeka has been a sales representative for three years but has never met his target.

(a) State five reasons that could have accounted for his inability to meet his target.

Answer

The reasons that could have accounted for Emeka’s inability to meet his target are:

  1. They may not have motivated Emeka enough to put in his best.
  2. Emeka must have been told not to grant credit facilities to his customers.
  3. The price of his goods/products may be too exorbitant and therefore tends to scare his customers from patronizing him.
  4. Emeka may not have been supplied with enough equipment or facilities to work with.
  5. Emeka’s inability to meet his target may be as a result of his inexperience in the situation of the market.
  6. Emeka’s company may have failed to advertise the products in order to create adequate awareness to the potential customers.
  7. Emeka’s attitude that is if he was hostile to the customers may pose as a hindrance to meet his target.

 

(b) Explain five promotional tools he could use to stimulate sales of his company’s products.

Answer

The following are the promotional tools which he can use to promote his company’s products.

  1. He can use the tool of premium offer where he offers a low-value item as a bonus to the buyer e.g. sweet, biro, exercise books, etc.
  2. He can offer a reduction of price to some of his products at specific periods of the year.
  3. He may engage the services of dancers or other persons to perform a special display at the point of sales to attract customers.
  4. He can use exhibitions and demonstrations as an excellent way of getting the attention of potential customers.
  5. Contest in form of lottery or raffle draws may be organised and prizes will be given to the winners.

The following information relates to Raisa’s grocery store as at 31st December, 2018.

You are required to calculate:

  1. Gross profit
  2. Net profit
  3. Percentage of gross profit

Answer

Percentage of Gross profit

\( \frac{Gross \: profit}{sales}  \: \times \: \frac{100}{1} \)

\( \frac{91,000}{230,000}  \: \times \: \frac{100}{1} \)

= 39.56% Or 40%

 

Second Method

(A)  Cost of Goods Sold = Opening Stock + Purchases – Closing Stock

i.e. 20,000 + 150,000 – Le 35,000 = Le 139,000.

(B) Gross Profit = Sales – Cost of Goods Sold

Le230,000 – Le139,000 = Le91,000

(C)  Net Profit = Gross Profit + Rent received – Expenses

Le91,000 + Le80,000 – Le29,000 = Le171,000 – Le29,000

= Le142,000

(D) Percentage of Gross Profit

\( \frac{Gross \: profit}{sales}  \: \times \: \frac{100}{1} \)

\( \frac{Le91,000}{Le230,000}  \: \times \: \frac{100}{1} \)

= 39.56% Or 40%

(1) A sole proprietor has been advised to advertise her business in order to increase sales.

(a) (i)    List four advertising media she could use.

Answer

(ii)   State four factors she could consider in the choice of a medium.

Answer

  1. Nature of Product: The medium should fit the nature of the product.
  2. The audience: The target audience should be considered if the advertisement is to make any impact.
  3. Frequency: This is the number of times an advertisement is delivered through a particular medium.
  4. Cost of media: The cost should be considered in relation to the amount of funds available and the circulation of the media.
  5. The flexibility of a medium: A medium should offer considerable flexibility in terms of the geographical market covered and the time of message presented.
  6. Media circulation: The media to be selected should read the desired type of market with minimum waste.
  7. Media effectiveness: The efficiency and effectiveness of the media in making the required impact on the audience should be considered.

 

(b)    State four advantages of advertising to her business.

Answer

  1. It educates the customers on the use of the products.
  2. It leads to an increase in demand which in turn brings about an increase in sales.
  3. Advertising helps to inform customers about the existence of a new product.
  4. It brings about healthy competition among producers of similar goods.
  5. It helps to build a good corporate image for the organisation.
  6. It makes mass production of goods possible as markets are being created.
  7. Effective advertising aids mail order business.

(a)     State four functions of a Cartel.

Answer

  1. More profit is generated through restrictions of output and an increase in price.
  2. A cartel was established so that members can maintain their market shares by regulating output.
  3. The output of members is restricted in order to reduce or eliminate wastages.
  4. The price of their products is artificially increased.
  5. The coming together of the members to agree on output and common prices reduces the fear of competition.

 

(b)     Explain three advantages and three disadvantages of public enterprises.

Answer

The advantages of public enterprises are:

  1. Public enterprises can sue and be sued in their names and can enter into a contract on their own.
  2. Revenue can be generated by government from dividends, rates, and fees due to its participation in public enterprises.
  3. Death or retirement of any member cannot bring the organisation to an end. It has perpetual existence.
  4. The economy of a nation is regulated by ensuring the employment of its citizens.
  5. The government makes funds available for large-scale investments because of its large financial resources.
  6. Most social and essential services are provided at a subsidized rate to the public.
  7. By establishing public enterprises, wasteful duplication is avoided.

     The disadvantages of public enterprises are:

  1. Red tapism and bureaucratic tendency might cause delays in decision-making process.
  2. The cost of providing infrastructure facilities is very high.
  3. There is a high level of corruption and embezzlement of funds by the people in charge.
  4. Government enterprises are usually inefficient in operation and management when compared with private businesses.
  5. Most public enterprises are run at a loss because they are not profit-oriented.
  6. Lack of competition encourages inefficiency in operation. They are monopolistic in nature.

(a)     List six credit instruments used in business transactions

Answer

 

(b)     Mr. Sylva is considering hire purchase as a source of finance for his business operations. State four advantages and three disadvantages of this source of finance.

Answer

The advantages of hire purchase are:

  1. Hire purchase helps to increase his turnover.
  2. It affords him the opportunity to acquire expensive goods.
  3. It helps to increase his standard of living.
  4. It helps him to dispose of expensive and durable goods quickly.
  5. Higher prices are charged for goods sold under this condition.
  6. Mr. Sylva will retain ownership of the goods he sold.

The disadvantages are:

  1. There might be problems of irrecoverable debts to Mr. Sylva.
  2. He will suffer the cost of keeping additional records.
  3. There might be unnecessary delays from unscrupulous customers in making payments.
  4. It might lead him to have court cases with some of his customers.
  5. His capital may be tied down between the time of sales and payment.

(a)     Explain four factors to be considered in setting up a retail business.

 Answer

  1. Capital: The total money available to manage and finance the business effectively must be considered.
  2. Nature of goods: Some goods are perishable while others are not such as technical or industrial goods.
  3. Source of supplies: The retailer has to take decisions on how and where to replenish stock to reduce the cost of transportation.
  4. Pricing policy: A decision has to be taken whether to charge low or high prices depending on the type of goods.
  5. Location of the shop: The business has to be located where there are potential customers and where they can easily be found.
  6. Terms of payment: The retailer should consider whether to offer payment or not and to whom.
  7. Experience: The retailer needs to know and have the technical know-how on how to run the business before embarking on it.

 

(b)     State how the government uses the following to regulate business:

  1. Registration of business name
  2. Patent
  3. Trademark
  4. Copyright

       Answer

  1. Registration of business: Businesses such as partnership, limited liability companies can only commence business if they are registered with Corporate Affairs Commission. Public limited liability companies are given, in addition, a certificate of trading after receiving a certificate of incorporation before they can start a real business.
  2. Patent: This is an exclusive right granted to an inventor to be the only person to make, use or sell a product or an invention. The possession of patent rights gives the holder some degree of monopoly power over his own invention.
  3. Trade Mark: This is a mark or name identified with some goods which have been registered under the Trade Mark Act and cannot be used by any other producer. e.g Close-up, Omo, Joy soap, Lux, etc.
  4. Copyright: This is a right given to a product of literary work or musical composition. It is an exclusive right given to an author, composer, or artist to publish and sell his work. His work will not be allowed to be copied without permission.

(a)     State four functions of a Stock Exchange.

Answer

  1. The market serves as a place where sales and purchases of existing securities take place.
  2. The prices of stock can be determined through the price mechanism of demand and supply.
  3. The market ensures that all contracts and transactions are subjected to the rules and regulations.
  4. It helps to provide long-term funds to finance capital projects for the government.
  5. The stock market provides an avenue for people to invest their surplus funds to purchase securities.
  6. The market facilitates the transfer of securities from one investor to another.
  7. The market helps to provide investment and professional advisory services to the participants in the market.

 

(b)      Explain the following types of securities traded on the Stock Exchange:

  1. Debentures
  2. Bonds
  3. Shares
  4. Stock

Answer

  1. Debentures: It represents the document that acknowledges the indebtedness of a company. They are secured on the assets of the company. Debentures have a fixed rate of interest.
  2. Bonds: They are fixed interest investment securities issued for a long-term duration and then have coupon rates. Government issues bonds as a way of raising funds from the stock market. It has a date of redemption whereby the issuer pays the nominal value of the bond to the holder.
  3. Shares: This is the interest of a shareholder in a company measured by a sum of money. Shares are the unit of the capital of a company allocated to individuals. Shares can be divided into ordinary and preference shares.
  4. Stock: It is a collection of shares into a bundle or consolidated shares. Stocks are usually quoted per N100 nominal value but fractions of it may be bought and sold.

(a)     State five functions of an Export Promotion Council.

Answer

The functions of an Export Promotion Council are:

  1. Nigerian Export Promotion Council introduces measures to increase the volume and quality of goods to be exported.
  2. It also provides information about Nigerian exports in the international market.
  3. It helps to review existing products for export and also set out procedure for exportation.
  4. All expenses must obtain and prepare all necessary documents through the help of the council.
  5. It organises seminars and workshops on export management for people engaging in international trade.
  6. The council prepares and issues out publications containing information about the various activities of the council.

 

(b)     Outline five roles performed by the Customs and Exercise Authority towards the growth of Commerce.

Answer

The roles performed by the Customs and Exercise Authority towards the growth of Commerce are:

  1. The Custom Authority prevents smugglers from bringing or taking goods in or out of the country.
  2. It is the duty of the Customs Authority to compile statistics on import and export.
  3. They help to collect taxes on imported, exported, and locally made goods.
  4. Custom Authority helps to monitor and supervise bonded warehouses where goods are stored until the duties are paid.
  5. They help to generate revenue for the government in form of import and export duties.
  6. Custom Authority provides quarantine service for imported animals and plants that have diseases so as to prevent the spread of diseases.

Emeka has been a sales representative for three years but has never met his target.

(a) State five reasons that could have accounted for his inability to meet his target.

Answer

The reasons that could have accounted for Emeka’s inability to meet his target are:

  1. They may not have motivated Emeka enough to put in his best.
  2. Emeka must have been told not to grant credit facilities to his customers.
  3. The price of his goods/products may be too exorbitant and therefore tends to scare his customers from patronizing him.
  4. Emeka may not have been supplied with enough equipment or facilities to work with.
  5. Emeka’s inability to meet his target may be as a result of his inexperience in the situation of the market.
  6. Emeka’s company may have failed to advertise the products in order to create adequate awareness to the potential customers.
  7. Emeka’s attitude that is if he was hostile to the customers may pose as a hindrance to meet his target.

 

(b) Explain five promotional tools he could use to stimulate sales of his company’s products.

Answer

The following are the promotional tools which he can use to promote his company’s products.

  1. He can use the tool of premium offer where he offers a low-value item as a bonus to the buyer e.g. sweet, biro, exercise books, etc.
  2. He can offer a reduction of price to some of his products at specific periods of the year.
  3. He may engage the services of dancers or other persons to perform a special display at the point of sales to attract customers.
  4. He can use exhibitions and demonstrations as an excellent way of getting the attention of potential customers.
  5. Contest in form of lottery or raffle draws may be organised and prizes will be given to the winners.

The following information relates to Raisa’s grocery store as at 31st December, 2018.

You are required to calculate:

  1. Gross profit
  2. Net profit
  3. Percentage of gross profit

Answer

Percentage of Gross profit

\( \frac{Gross \: profit}{sales}  \: \times \: \frac{100}{1} \)

\( \frac{91,000}{230,000}  \: \times \: \frac{100}{1} \)

= 39.56% Or 40%

 

Second Method

(A)  Cost of Goods Sold = Opening Stock + Purchases – Closing Stock

i.e. 20,000 + 150,000 – Le 35,000 = Le 139,000.

(B) Gross Profit = Sales – Cost of Goods Sold

Le230,000 – Le139,000 = Le91,000

(C)  Net Profit = Gross Profit + Rent received – Expenses

Le91,000 + Le80,000 – Le29,000 = Le171,000 – Le29,000

= Le142,000

(D) Percentage of Gross Profit

\( \frac{Gross \: profit}{sales}  \: \times \: \frac{100}{1} \)

\( \frac{Le91,000}{Le230,000}  \: \times \: \frac{100}{1} \)

= 39.56% Or 40%