WAEC SSCE - Commerce - 2019 (Essay)

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(a) Three benefits of a commodity exchange

1. It provides a central and organised market where buyers and sellers of commodities can meet and deal.
2. It helps to stabilise prices of commodities through the forces of demand and supply, and reduces wide price fluctuations.
3. It makes marketing of commodities easier and faster because goods are bought and sold by grade or sample without physical inspection of the whole bulk.

Other benefits include price information for producers and the opportunity for hedging against future price changes.

(b) Two methods of trading in a commodity exchange

• (i) Spot (cash) trading: This is the buying and selling of commodities for immediate delivery and payment at the current market price. The goods are available for immediate exchange.
• (ii) Futures (forward) trading: This involves an agreement to buy or sell a commodity at an agreed price now, but for delivery and payment at a fixed future date. It is used to guard against the risk of future price changes (hedging) and by speculators.

(c) Four requirements for trading in a commodity exchange

1. The commodity must be capable of being graded or classified into recognised standard qualities.
2. The commodity must be durable so that it can be stored while awaiting sale.
3. The trader must be a registered member of the exchange.
4. The commodity must be in regular and large supply so that continuous dealings can take place.

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(a) Type of cooperative society formed

Since the staff came together mainly to have access to funds (savings and loans), the society they formed is a Cooperative Thrift and Credit Society (also called a savings and credit or thrift and loan cooperative).

(b) Four features of the cooperative society

1. Open and voluntary membership: Anyone qualified may join or leave freely without compulsion.
2. Democratic control: It is run on the principle of one member, one vote, regardless of the number of shares held.
3. Common bond and mutual help: Members join together for a common economic purpose and to help one another.
4. Contribution of savings and payment of dividend: Members save regularly and surplus is shared as dividend, usually in proportion to patronage or savings.

Other features include registration under the cooperative law and limited interest on capital.

(c) Three advantages of the cooperative society

1. Members can obtain loans at low rates of interest to meet their needs.
2. It encourages the habit of thrift and regular saving among members.
3. Surplus (profit) is shared among members as dividend, so they benefit directly.

Two disadvantages

1. Shortage of capital, since it depends mainly on the small contributions of members.
2. Poor or inefficient management, as officers are often members with little business or managerial expertise.

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(a) Six advertising media used in business

1. Television.
2. Radio.
3. Newspapers.
4. Magazines.
5. Posters and billboards (hoardings).
6. Internet and social media (online advertising).

(b) What is personal selling?

Personal selling is a method of promotion in which a salesman meets prospective buyers face to face, presents and demonstrates the product, persuades them to buy, and answers their questions with the aim of making a sale. It involves direct, personal communication between the seller and the customer.

(c) Four advantages of personal selling

1. The salesman can give a direct demonstration and detailed explanation of the product to the customer.
2. It allows immediate feedback, so the salesman can answer questions and clear doubts on the spot.
3. The sales message can be adjusted to suit the particular needs of each customer.
4. It builds a personal relationship with customers, which encourages repeat purchases and loyalty.

Two disadvantages of personal selling

1. It is expensive because of the salaries, commission and travelling expenses of salesmen.
2. It reaches only a limited number of customers at a time, unlike mass advertising media.

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Cost of goods bought

Item	Quantity	Unit price (N)	Amount (N)
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

(i) Cash paid if payment is made within 7 days. Deduct the trade discount first, then the cash discount.

Cost of goods	N260,000
Less 10% trade discount (10/100 x 260,000)	N26,000
Value after trade discount	N234,000
Less 6% cash discount (6/100 x 234,000)	N14,040
Actual cash paid	N219,960

(ii) Selling price at a mark-up of 20%. The mark-up is added to the value of goods after trade discount:

\[\text{Mark-up}=\frac{20}{100}\times234{,}000=46{,}800\]\[\text{Selling price}=234{,}000+46{,}800=\mathbf{N280{,}800}.\]

(iii) Net profit.

Gross profit (mark-up)	N46,800
Add discount received	N14,040
	N60,840
Less expenses: Salaries and wages 8,000; Rent and rates 3,500; Fuel 2,000; Electricity 1,500	N15,000
Net profit	N45,840

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(a) Five reasons that would make a bank dishonour a customer's cheque

1. Insufficient funds: The customer's account does not have enough money to cover the amount on the cheque.
2. Irregular or missing signature: The signature on the cheque differs from the specimen signature held by the bank, or the cheque is unsigned.
3. Post-dated or stale cheque: The cheque bears a future date, or it is stale (presented more than six months after the date on it).
4. Difference in amount: The amount written in words differs from the amount written in figures.
5. Countermanded payment (stop order): The drawer has instructed the bank in writing not to pay the cheque.

Other reasons include the death, insanity or bankruptcy of the drawer, a garnishee order on the account, and material alteration of the cheque not countersigned.

(b) Five reasons countries introduce restrictions in foreign trade

1. To protect infant (young) industries from being killed by cheap foreign competition.
2. To correct an unfavourable balance of payments by reducing imports and conserving foreign exchange.
3. To raise government revenue through import and export duties.
4. To prevent the importation of harmful or dangerous goods such as hard drugs and expired products.
5. To retaliate against the trade restrictions imposed by other countries.

Other reasons include preventing dumping and protecting local employment.

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(a) Four career opportunities available to a student of commerce

1. Accountancy and auditing.
2. Banking and finance.
3. Marketing, sales and advertising.
4. Insurance and actuarial work.

Other examples include entrepreneurship, purchasing and supply, and teaching of commercial subjects.

(b) Two functions of an entrepreneur

1. He bears the risk and uncertainty of the business by investing his capital with no guarantee of profit.
2. He organises and coordinates the other factors of production (land, labour and capital) and takes key managerial decisions to run the business.

(c) Explanation of the activities with two examples each

• (i) Extractive industry: This is concerned with the extraction or taking of raw materials and natural resources from the earth, sea or air. Examples: mining of gold or coal, and fishing.
• (ii) Construction industry: This is concerned with the assembling and putting together of materials to build structures. Examples: building of houses, and construction of roads and bridges.
• (iii) Manufacturing industry: This is concerned with converting or processing raw materials into finished or semi-finished goods. Examples: textile production, and food or beverage processing.
• (iv) Tertiary industry: This provides services rather than goods, aiding trade and the comfort of people. Examples: banking services, and transportation.

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(a) The term that relates to the situation

Where a country's total payments to other countries are greater than its total earnings from abroad, the country has an unfavourable (adverse or deficit) balance of payments.

(b) Six measures the country could take to correct the situation

1. Devaluation of the currency: Reducing the value of the local currency makes exports cheaper and more attractive abroad while making imports dearer, so exports rise and imports fall.
2. Import restrictions: Imposing tariffs, quotas and import licences reduces the volume of goods imported and cuts the outflow of foreign exchange.
3. Export promotion: Encouraging exporters through subsidies, incentives and export bonuses increases the country's earnings from abroad.
4. Deflationary policies: Reducing government spending and raising taxes lowers domestic income and demand for imported goods.
5. Exchange control: Government control over the buying and selling of foreign currency limits the amount of foreign exchange available for imports.
6. Encouraging import substitution: Promoting local production of goods formerly imported reduces dependence on imports and saves foreign exchange.

Other measures include borrowing from abroad or the IMF, and encouraging foreign investment and tourism to bring in foreign exchange.

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(a) Four services rendered by courier companies

1. Fast collection and delivery of parcels, documents and packages from door to door.
2. Tracking of items so that senders and receivers can monitor the movement of their consignments.
3. Delivery of urgent business documents such as contracts, cheques and legal papers.
4. Packaging and safe handling of fragile and valuable items, sometimes with insurance cover.

Other services include international express delivery and cash-on-delivery arrangements.

(b) Three advantages of rail transport

1. It is suitable for carrying heavy and bulky goods over long distances at relatively low cost.
2. It is fast and runs to a fixed timetable, so it is fairly reliable and not affected by traffic jams.
3. It is safer, with a lower risk of accidents, and can carry large quantities of goods and many passengers at once.

Three disadvantages of rail transport

1. It is inflexible because trains can move only along fixed rail routes and cannot provide door-to-door service.
2. It requires very heavy capital to construct and maintain the rail lines and stations.
3. It is unsuitable for perishable goods and small, urgent consignments over short distances.