Question

8. The following information was extracted from the books of Jinka Enterprises as at 31st August 2015:
15 cartons of sweets at #2,000 per carton; 25 cartons of milk at #4,000 per carton; 15 cartons of sugar at #3,000 per carton; 17 cartons of soap at #5,000 per carton.
The following payments were made: Rent and rates #3,500; Salaries and wages #8,000; Fuel #2,000; Electricity #1,500.
A cash discount of 6% and a trade discount of 10% was allowed if payment was made within 7 days.
(i) Calculate how much cash was paid for the goods bought if payment was made within 7 days.
(ii) If all the goods were sold at a markup of 20%, determine the selling price.
(iii) Calculate the value of the net profit made.

Accepted Answer

(i) Cost of goods sold:
Sweets: 15 × #2,000 = #30,000
Milk: 25 × #4,000 = #100,000
Sugar: 15 × #3,000 = #45,000
Soap: 17 × #5,000 = #85,000
Total = #260,000

If payment was made within 7 days:
Cash discount = 6% × 260,000 = #15,600
Trade discount = 10% × 260,000 = #26,000
Cash paid = 260,000 − 15,600 − 26,000 = #218,400

(ii) If markup is 20% (¼):
Margin = 1/(1+4) = 1/5
Gross profit = ¼ × 218,400 = #54,600
Selling price = 5 × 54,600 = #273,000

(iii) Computation of net profit:
Gross profit = #54,600
Expenses: Rent and rates #3,500 + Salaries #8,000 + Fuel #2,000 + Electricity #1,500 = #15,000
Net profit = 54,600 − 15,000 = #39,600

WAEC Commerce 2019 Theory — Question 8

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