WAEC Commerce 2022 Theory Past Questions

Model answer

(a) Division of Labour. (b)(i) Division of labour can lead to production of large output; it encourages specialization, making labour more skillful; it promotes speed, with labour movement from one function to another minimized; division of labour can lead to innovation; it is more efficient as a process of production. (ii) Interdependence among workers can lead to a total breakage of production if there is an absence or breakdown in one unit; division of labour can lead to monotonous work, leading to fatigue; there can be a lack of responsibility in the case of defective output; division of labour is more expensive, especially for small-scale operations.

Model answer

(a) This is a "vertical integration" — the coming together of two or more firms that are in the same chain of supply. For instance, if firm A provides input for firm B, the coming together of firm A and firm B will be regarded as vertical integration. (b) Firms merge to gain tax incentives (tax that would have been paid separately will now be paid by one, with lesser administrative cost, and with incentives); to correct a financial deficit in one of the firms; to promote efficiency of supply from each end of the firms; to improve asset acquisition of the firms. (c) Bank loans: the company can seek loans from commercial banks to finance its activities. Issuance of shares: to its members, which can also serve as an alternative source of finance. Retained profit: using the retained profit can also serve as a source of finance to the company.

Model answer

(a) A trade association is the coming together of people who are in the same line of product, while a chamber of commerce is the association of businesses from different lines of products. (b) Chamber of commerce ensures the creation of a favourable business environment for businesses; it is the body that organizes local and international trade fairs for businesses; it advises the government on various policies that can promote businesses; it helps businesses remove odds and address unfair competition. (c) Employers' association aims at protecting the interest of its members; it gathers salary and wage information to know how to remunerate workers; it trains staff and members; it stands on behalf of its members before the government.

Model answer

(a) A - Speaker, B - Microphone, C - Webcam, D - Flash drive, E - Monitor, F - Printer, G - Keyboard, H - Joystick. (b) Speaker: it provides sound output. Microphone: it provides sound input for the computer. Webcam: it provides image input for the computer. Flash drive: it is used as storage from the computer and also provides input for the computer. Monitor: it provides softcopy output from the computer. Printer: it provides printed output from the computer.

Model answer

(a) Loans from bank; loans from family and friends; profit plough-back; credit purchase. (b)(i) Acceptance credit: a type of letter of credit that is paid by a time draft, used to authorize payment on or after a specific date, once the terms of the letter of credit have been complied with. (ii) Luncheon voucher: a ticket used to pay for food in a restaurant, issued by an organization to its staff. (iii) Bill of exchange: 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: it improves sales on the part of the seller; it enables the buyer to use goods that he does not have ready cash for. Disadvantages: it is usually more expensive than a cash purchase; a buyer can abscond with the goods; the seller may incur costs in recovering instalments.

Model answer

(a) International trade: Documentary collection (an important bank payment method under which the sale transaction is settled by the bank through an exchange of documents); Letter of credit (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 goods are shipped and delivered before payment is due, usually within 30, 60, or 90 days). Home trade: Money order (a way of giving a bank instruction to pay a specified person at a particular period of time); Cash (the act of paying for goods or services by exchanging cash with the seller/provider of the service). (b) Production: it is not possible for every country to produce equally at a cheap cost, which is why international trade is necessary. Factors of production: labour, capital and raw material for producing goods are available at different rates in different countries. Cost of production: each country finds it advantageous to produce only those goods/services it can produce efficiently, leaving other activities to other countries at lower cost. Resource distribution: companies often face problems due to the limitation of natural resources, as there is an unequal distribution of resources among countries. Government policy: at times, government policy can also encourage international trade.

Model answer

(a) It provides visual display of the goods that are intended to be promoted; it serves as a means of educating prospective customers on how to use the goods; it serves as a reference point for future reference; it combines sound and visual effects in presenting the goods. (b) Advertising: any form of paid communication or promotion for a product, service or idea. Sales promotion: an incentive tool used to drive up short-term sales, directed at either the consumer or the trade. Public relations: companies cannot survive in isolation; they need constant interaction with customers, employees and different stakeholders. Direct marketing: a communication channel established directly with the customer, without using any intermediaries.

Model answer

Cost of sales = Opening stock + Purchases − Closing stock = 80,000+180,000−60,000 = 200,000. (i)/(ii)/(iii)/(iv) There is no sufficient information (no sales figure given) to calculate gross profit, net profit, gross profit margin, or net profit margin. (v) Working capital = current assets − current liabilities = (150,000+60,000) − 100,000 = 110,000. (vi) Average stock = (opening stock+closing stock)/2 = (80,000+60,000)/2 = 70,000. Rate of inventory turnover = cost of goods sold / average stock = 200,000/70,000 ≈ 2.86 times.