WAEC Commerce 2015 past questions and answers

Branding gives a product a distinctive name or mark.

A del credere commission is the extra pay an agent gets for guaranteeing that credit buyers will pay.

A loss adjuster examines a claim and works out how much loss was suffered; an actuary calculates risks and premiums.

Services sold to foreigners earn foreign exchange, so they are invisible exports.

Market segmentation splits a market into groups of buyers with similar characteristics.

Warehousing stores goods produced ahead of demand until they are needed.

Government taking over privately owned businesses is nationalisation.

The Niger Basin Authority (formerly River Niger Commission) has nine member countries through which the Niger and its tributaries flow.

A bank draft is a cheque a bank draws on itself, so the bank is both drawer and drawee.

Firms in the same line of business form a trade association; a trade union is for workers.

Authorised capital = 40,000,000 × ₦4 = ₦160,000,000.

Issued capital = 25,000,000 × ₦4 = ₦100,000,000.

Unissued shares = 40,000,000 − 25,000,000 = 15,000,000 × ₦4 = ₦60,000,000.

Advertising informs and persuades people, so it stimulates demand.

Consumer sovereignty means the consumer's choices decide what is produced: the buyer is king.

Finding and taking out minerals is extractive; the others are construction and manufacturing.

Cost of goods sold = 6,000 + 23,000 − 8,000 = D21,000; gross profit = 30,000 − 21,000 = D9,000.

Average stock = (6,000 + 8,000) ÷ 2 = D7,000; rate of turnover = 21,000 ÷ 7,000 = 3 times.

A mason builds with bricks and blocks, which is construction.

A cheque refused for lack of funds is dishonoured, or 'bounced'.

Retailers are close to consumers and pass on information about their tastes and market trends to wholesalers.

Uberrimae fidei requires both parties to disclose all material facts honestly.

Public corporations are government-owned and receive government subsidies.

Duty drawback is a refund of import duty paid on goods that are later re-exported.

Working capital finances the day-to-day running of a business.

Stock is held for sale and changes often, so it is a current asset; the others are fixed assets.

Devaluation officially lowers the value of a currency against other currencies.

Mobile shops sell from vans that move to customers.

The marketing concept is consumer-oriented: it starts with the customer's needs.

Dumping is selling goods abroad below cost or below the home price.

An order cheque is payable to a named payee or to his order.

Under proximate cause, the insurer pays only if the main cause of loss is the risk insured; fire was not covered.

Short-term funds are lent and borrowed on the money market.

Ex-div (without dividend) means the buyer does not get the next dividend; it stays with the seller.

Advertising and lower prices both attract more buyers, increasing sales.

Specialisation produced surpluses that people needed to exchange, giving rise to commerce.

With a credit transfer (bank giro), one cheque pays many people through their bank accounts.

Ordinary shares (equity) represent the owners' interest in a company.

Public relations builds a good image of an organisation with the public.

Foreign trade can lead to dumping of cheap goods that harm local industries.

Selling on credit exposes the retailer to bad debts and ties up his capital.

A private company cannot invite the public to buy its shares.

An ad valorem duty is a percentage of the value of the goods.

Many public corporations fail because government does not give them enough funds.

Size, weight and perishability of goods affect the choice of transport; who made them does not.

A bill of lading is a document of title: whoever holds it can claim the goods.

Freight is the charge for carrying goods by ship.

(a) Occupation is any lawful activity a person engages in regularly to earn a living.
(b) Diagram: OCCUPATION at the top branching into Industrial, Commercial and Direct services; Industrial branches into Extractive, Manufacturing and Constructive; Commercial branches into Trade (home and foreign) and Aids to trade (transport, banking, insurance, warehousing, advertising, communication).
(c)(i) Industrial occupation – producing goods by extraction, manufacturing or construction, e.g. mining.
(ii) Commercial occupation – distributing and exchanging goods (trade and aids to trade), e.g. banking or retailing.
(iii) Direct services – personal services rendered directly to people, e.g. teaching, medicine, law.

The diagram must show the three main classes and their sub-divisions.

(a) A vending machine is a coin- or card-operated machine that releases goods such as soft drinks, snacks or tickets when the buyer pays.
(b) Any six: wide variety of goods under one roof; self-service lets shoppers choose freely; goods are price-marked, so no bargaining and easy budgeting; pleasant, air-conditioned surroundings; quality, pre-packed and branded goods; prices are often lower (bulk buying); convenient location and parking; long opening hours; trolleys and baskets; accept cards/electronic payment.

Supermarket reasons relate to variety, self-service and convenience.

(a) Any five: accept deposits; grant loans and overdrafts; provide means of payment (cheques, transfers, cards); safe custody of valuables; foreign exchange services/letters of credit; discount bills of exchange; give financial advice; act as agents (pay bills, buy shares) for customers; electronic banking.
(b) Any five, explained: bank rate – raising it makes loans dearer and reduces lending; open market operations – selling/buying government securities to reduce/increase bank cash; liquidity (cash) ratio – fixing the proportion of deposits banks must keep in liquid form; special deposits – requiring banks to deposit extra funds with it; selective credit control/directives – telling banks which sectors to lend to; credit ceilings; moral suasion – persuading banks to follow its policy.

Each control tool should say how it changes banks' ability to lend.

(a) Any five: collect import and export duties; prevent smuggling; stop importation of prohibited/harmful goods; enforce import quotas and trade regulations; examine and clear goods/check documents; compile trade statistics; supervise bonded warehouses; quarantine/health checks on plants, animals and food.
(b) Any five, explained: builds and maintains airports, runways and terminals; provides air traffic control and navigation aids; provides security at airports; provides warehouses/cargo sheds for air freight; provides passenger facilities (lounges, car parks); fire and rescue services; collects landing and parking fees; licenses and regulates airport businesses.

Customs functions centre on duties and control of goods crossing the border.

(a) Any five, explained: to introduce a new product; to increase sales of existing products; to inform consumers about uses, prices and where to buy; to persuade consumers to buy; to meet competition/retain market share; to build a good image and brand loyalty; to remind customers; to educate on new uses.
(b) Any five: it raises costs and prices of goods; it can be false or misleading; it makes people buy what they do not need (wasteful consumption); it may promote harmful goods (alcohol, tobacco); some adverts are indecent or offend culture; it helps big firms create monopolies; competitive advertising wastes resources.

Criticisms are mostly that advertising raises prices and misleads.

(a) A contract is an agreement between two or more parties that is enforceable by law; it may be oral or written.
(b) Any four, explained: by performance – both parties do what they promised; by agreement – parties agree to end it; by breach – one party fails to perform, freeing the other; by frustration – an event beyond control makes performance impossible (e.g. destruction of the subject matter); by operation of law – death, bankruptcy, or a change in law; by lapse of time – a contract for a fixed period ends.

Name each way and give a short explanation or example.

(a) Any five: to provide essential services (water, electricity) at low prices; to control strategic industries (defence, oil); to prevent exploitation by private monopolies; projects too large for private investors; to create employment; to promote even development of all areas; to generate revenue; to reduce foreign domination.
(b) Any five, explained: political interference in management; inefficiency and bureaucracy; corruption and embezzlement; inadequate funding; poor management/appointment of unqualified staff; overstaffing; lack of competition and profit motive; frequent changes of management; large size makes control difficult.

Problems in (b) explain why many public enterprises perform poorly.

(a)(i) COD – Cash on Delivery.
(ii) CIF – Cost, Insurance and Freight.
(iii) FOB – Free on Board.
(iv) E. and O. E. – Errors and Omissions Excepted.
(b)(i) Quantity discount = 5% × 100,000 = ₦5,000.
(ii) Amount after quantity discount = ₦95,000; cash discount = 7½% × 95,000 = ₦7,125.
(iii) Net amount payable = 95,000 − 7,125 = ₦87,875.

Take the quantity discount first, then the cash discount on the reduced amount.