NABTEB Commerce 2022 Theory Past Questions

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(a) The workshop uses the DIVISION OF LABOUR (specialization) production process. (b)(i) Advantages of division of labour to the workshop: - It leads to specialization, which improves the skills of the labour force. - It leads to production of a larger quantity of furniture. - It is a means of creating more jobs. - Wastage of resources/materials is minimized. - The production process becomes more speedy, as movement of labour from one function to another is minimized. (b)(ii) Disadvantages of division of labour to the workshop: - Monotonous nature of the job for the labour, as a result of repeating the same task every time. - Limited skills on the part of each labourer - a worker becomes skillful only in the line in which he specializes. - High cost of production, as more specialized labour may need to be paid more; this is worse if production is not carried out in large volume. - Total breakdown of production may occur if one section of the labour force (e.g. the person fixing) is unavailable.

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(a) This would form a VERTICAL INTEGRATION/MERGER. Vertical integration is a type of merger or combination of two or more firms, where a firm merges with another firm that supplies its input (i.e. companies that operate along the same chain of supply/production merge). Here, XYZ (which processes cotton, the raw material) merges with ABC (which uses cotton to produce textiles). (b) Reasons that would have necessitated the merger: - Diversification of the activities of a company. - Financial crisis on the part of one of the companies. - Improvement in the value and worth of the companies. - Tax incentives. (c) Sources of finance available to the company formed: 1. Retained earnings: this is the easiest source of finance to any business. It is part of the profit made previously that is yet to be spent; it can be used to finance the company whenever it is needed. 2. Issuance of shares: a limited liability company can issue shares to its members (for a private company) or to the general public (for a public company) to raise funds. 3. Loan: the company can apply for a loan from a financial institution to finance its activities.

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(a) A trade association is an association of sellers of the SAME product (same line of trade), while a chamber of commerce is an association of sellers/businesses from DIFFERENT lines of products/trades within an area. (b) Functions of a chamber of commerce: - Organization of local and international trade fairs. - Promotion of trade and businesses in the country. - Removing unfair competition among businesses. - Creation and maintenance of a favourable business environment. (c) Functions of an employers' association: - Training and developing staff and members. - Obtaining data on wages to know the prevailing wage in the market. - Representation of members in front of government. - Promoting the welfare of its members.

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(a) A - speaker; B - microphone; C - webcam; D - flash drive; E - monitor; F - printer; G - keyboard; H - joystick. (b) Uses: - Speaker - it produces sound output processed in the computer. - Microphone - it avails voice input into the computer. - Webcam - it avails image input into the computer. - Flash drive - it enables data to be saved from the computer and viewed at a later time. - Monitor - it provides image output, also known as softcopy output, from the computer. - Printer - it provides printed (hardcopy) output from the computer system. - Keyboard - it is used to input text and commands into the computer. - Joystick - it is used as an input/control device, especially for games and simulations.

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(a) Sources of credit available to a sole trader: 1. Family and friends 2. Credit purchases (trade credit) 3. Bank loan 4. Overdraft (b)(i) Acceptance credit: An acceptance credit is a type of letter of credit paid by a time draft authorizing payment on or after a specific date, once the terms of the letter of credit have been complied with. (ii) Luncheon voucher: A luncheon voucher (LV) is a paper ticket (voucher) used by some employees to pay for meals in private restaurants; it is usually issued by the employer. (iii) Bill of exchange: a bill of exchange is a written order binding one party to pay a fixed sum of money to another party on demand or at some point in the future. (c) Advantages of hire purchase (to the seller): - It enables a person who does not have ready cash to be able to use an asset and make payment by instalments. - It increases the sales of the seller. Disadvantages of hire purchase (to the seller): - It is usually more expensive than cash sales, which may discourage some buyers. - A seller can lose a huge amount if the buyer is unable to make payments when due. - If a buyer absconds with the asset, it can be a great loss for the seller.

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(a) Means of payment in international trade: - Cash in advance: the safest method for exporters, because they are securely paid before goods are shipped and ownership is transferred. - Letter of credit: a letter of credit, or documentary credit, is basically a promise by a bank to pay an exporter once all terms of the contract are executed properly. - Open account terms: a sale in which the goods are shipped and delivered before payment is due, usually in 30, 60 or 90 days. Means of payment in home trade: - Cash payment: transferring cash to the seller of the goods when or before goods are delivered. - Issuance of a cheque: writing a cheque in favour of the seller for the amount of the goods, which he will transfer to the buyer. (b) Reasons countries engage in international trade: - Comparative advantage: some countries can produce certain products at a relatively cheap price compared with others. - Difference in natural resource endowment: countries are blessed with different natural resources; international trade enables a country to get what it does not have. - Political alignment: political alignment can make countries engage in international trade. - Differences in technical know-how: differences in technological advancement encourage countries to trade to access what they lack. - Government policy: government policy can encourage or discourage international trade. - To make exchanges that save cost.

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(a) Benefits of using television to advertise products: - It provides visual information about the product; a person wanting to sell shoes must display them so buyers can see what is being offered. - Television also provides voice information to prospective buyers. - Television can reach a large audience. - It can serve as a means of educating customers on how to use a product. (b) Other promotional means the company could adopt: 1. Sampling: the company can give consumers samples to taste/try and feel the improvement in the product. 2. Direct marketing: the company can approach prospective buyers directly to educate them about the product. 3. Salesperson: using sales persons to meet a wide range of buyers is another means of promoting a product. 4. Public relations: by creating good public relations and interacting with the general public, a company can easily promote its product.

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[Note: the source material indicates some of the J.K. Limited figures were not fully legible/complete in the scanned original, so a general method is set out below and applied fully to the companion Lompat Ventures data, which was complete.] General formulas: (i) Gross profit = Sales - Cost of sales, where Cost of sales = Opening stock + Purchases - Closing stock (ii) Net profit = Gross profit - Operating expenses (+ other income such as discount received) (iii) Gross profit margin (%) = (Gross profit / Sales) x 100 (iv) Net profit margin (%) = (Net profit / Sales) x 100 (v) Working capital = Current assets - Current liabilities (vi) Rate of inventory/stock turnover = Cost of goods sold / Average stock, where Average stock = (Opening stock + Closing stock)/2 Worked example (Lompat Ventures, year ended 31 December 2022): Trading Account: Opening stock 37,500 + Purchases 30,000 = 67,500 available; less Closing stock 15,000 = Cost of goods sold 52,500; Sales 70,000; Gross profit = 70,000 - 52,500 = 17,500. Less expenses: Wages and salaries 2,500; Rent and rates 3,500; Transportation 2,600 = Total expenses 8,600. (i) Net profit = Gross profit 17,500 - Expenses 8,600 = N8,900. (ii) Working capital = Current assets - Current liabilities. Current assets: Stock 15,000 + Debtors 100,000 + Cash at bank... (per the data provided). Current liabilities: Creditors + Bank overdraft (per the data provided). Working capital = Current assets total - Current liabilities total (compute using the specific figures supplied in the question). (iii) Rate of stock turnover = Cost of goods sold / Average stock = 67,500 / ((37,500+15,000)/2) = 67,500/26,250 = 2.5714 times (approximately 2 to 3 times).