WAEC Commerce 2018 Theory Past Questions

Model answer

(a) Size of the market: a firm cannot continue to expand division of labour without considering the size of the market it intends to serve, since division of labour is meant to increase output, and the market size dictates how much a firm can apply it. Availability of needed skill: when work is divided, specialists are required to handle each division; limited availability of specialists can limit the extent of division of labour. (b) Disadvantages: fatigue — workers involved in the same line of work repeatedly tend to get tired of the job; waste may result because not all labour will be used simultaneously. (c) Advantages: increase in total output since work is divided among labourers; expertise develops as workers specialise and become expert in their tasks, improving quality; economies of large scale reduce cost per unit of output; invention and innovation increase as expertise grows; time saving results from readily available labour to take up work from where another stops.

Model answer

(a) Easy availability of supplies that the store may require; easy access to needed infrastructural facilities such as roads and electricity; proximity to the targeted market/customers; the price of the store location (affordability); the size of the store needed for the target customer base. (b) By providing credit facilities to the retailer; assisting the retailer to deliver goods and wares as and when due; updating the retailer about price changes so they can adjust their disposal strategy; offering discounts to the retailer, both cash and trade discount; providing storage/financing help, easing the burden on the retailer's stock-holding.

Model answer

Public enterprise is owned by the taxpayer/government; established to maximize the welfare of the populace; no tax is charged; guarantee is usually limited; it is mostly a monopoly; headed by government appointees; unit of ownership cannot be determined; cannot have a subsidiary. Public company is owned by private individuals; established to maximize profit for the owners; it pays tax; in most cases limited by trust; it is most competitive; headed by vote of shareholders; unit of ownership is determined by the number of shares held by each person; it can have a subsidiary.

Model answer

(a) The organizational chart should show the Managing Director at the top, with the four departments (Accounts, Administration, Marketing, Production) as parallel divisions reporting to the top. (b) Accounting department: preparing all relevant accounts of the organisation; analysing the performance of financial reports. Administration department: sees to the day-to-day running of the organisation; provides feedback to top management about the situation of the organisation. Marketing department: advertises the products of the organisation to prospective buyers; is in charge of sales promotion and market research. Production department: ensures smooth production; ensures the quality standard of output.

Model answer

(a) Customer relationship: through marketing, the company develops an intimate/personal relationship with its customers. Market share stability: marketing helps a company maintain its market share, so as to continue meeting its sales level. Improving sales: marketing helps a company improve its level of sales. Customer education: marketing enables the firm to educate customers about the uses and benefits of its products. (b) Advertising: one of the most powerful promotional tools; through advertising, an agent can persuade prospective customers to buy the product. Sales promotion: this involves giving samples, buy-one-get-two offers, etc. to entice people to buy more of the product. Public relations: creating a special section for customers to meet company representatives and discuss issues related to the product. Direct selling: selling directly to customers to boost their morale and interest in buying more of the product.

Model answer

(a) The second-tier market can be defined as the market for buying and selling old securities which cannot be traded in the (main) stock exchange. (b) Advantages: it provides easy access to investment for investors; it saves companies advertising costs since investors can access all the information they need about the company in the market; the market serves as adviser to both investors and companies; it also ensures the survival and development of companies without fear of liquidation in the short-run. (c) Requirements: the company must be incorporated as a public limited company; it must have not less than 100 shareholders; the public must subscribe to at least 10% of the company's equity share; the company must submit three years' financial statement; the company must sign an undertaking with the stock exchange.

Model answer

(a) A contract can be defined as an agreement between two or more parties which has consideration and is enforceable under law. (b) Reasons for consumer protection: exploitation — consumer protection is mainly aimed at protecting the consumer against exploitation by producers as stipulated in the Price Control Act; substandard goods — protection is necessary to protect consumers so as to ensure they get value for what they pay for, without it producers can produce anything for the consumer; fake and misleading advertisement — some producers deceive consumers about a product, and through protection, consumers are made safe from fake adverts; credit purchase agreement — when credits are given to consumers, in most cases all the terms are not explained, so consumer protection ensures consumers are not cajoled into entering unfavourable credit purchases.

Model answer

(a) Liquid capital = Debtor + Cash = Le30,000 + Le6,750 = Le36,750. (b) Fixed assets = Plant and Machinery + Motor van = Le72,000 + Le31,000 = Le103,000. (c) Capital = Total Assets − Total Liabilities. Total assets = Fixed assets (103,000) + Current assets (stock 12,000 + debtors 30,000 + cash 6,750 = 48,750) = Le151,750. Less liabilities: Loan (50,000) + Trade creditors (43,000) = Le93,000. Capital = 151,750 − 93,000 = Le58,750. (d) Working capital = Current assets − Current liabilities = 48,750 − 43,000 = Le5,750 (trade creditors treated as the current liability; loan treated as long-term).