JAMB Commerce 2004
Questions & Answers

1) Distractor check: A student might mistakenly add the percentages together (15%) and deduct them at once, failing to apply the discounts sequentially. 2) Reasoning to the answer: First, subtract the 10% trade discount (₦15,000) from ₦150,000 to get ₦135,000; then, calculate the 5% cash discount on that new subtotal (₦6,750) and subtract it to arrive at ₦128,250. 3) Common mistake: Adding discount percentages together instead of applying them one after the other.

1) Distractor check: Options like 'To set product prices' or 'To reduce production costs' can confuse students who mix up marketing functions with internal finance and pricing strategies. 2) Reasoning to the answer: Informing potential customers and promoting sales are achieved because advertising primarily creates awareness of a product. 3) Common mistake: Assuming advertising directly controls internal manufacturing expenditures.

1) Distractor check: A student might choose 'Cooperative society' or 'Sole proprietorship' by miscounting the number of owners or confusing corporate structures. 2) Reasoning to the answer: A commercial association established by two or more people to pursue a lawful enterprise and divide profits is formally known as a partnership. 3) Common mistake: Conflating multi-owner partnerships with single-owner businesses.

1) Distractor check: An unwary student might subtract operating expenses directly from sales or mix up gross profit with the final bottom line. 2) Reasoning to the answer: Subtracting the cost of goods sold (₦300,000) from total sales (₦500,000) yields a gross profit of ₦200,000; subtracting operating expenses (₦100,000) from that gross profit leaves a net profit of ₦100,000. 3) Common mistake: Forgetting to calculate gross profit before subtracting operating expenses to find net profit.

Students might mistakenly choose option A because they assume all shares are closed or restricted, overlooking how public entities operate. A public corporation or company can offer shares to the general public, freely traded on the stock exchange. Common mistake: Confusing the public limited company structure with private companies that restrict share trading.

Students might choose option D, Gross National Product, by confusing domestic production parameters with national measures that include net income from abroad. Measuring the total value of goods and services produced within a country over a period defines Gross Domestic Product (GDP). Common mistake: Mixing up domestic bounds with national totals.

Students might mistakenly pick option A by incorrectly subtracting or miscalculating the 25% profit margin from the selling price rather than scaling up the cost price. To find the cost price C, note that the selling price represents C + 0.25C, which totals 1.25C. Given that 1.25C equals ₦400, dividing ₦400 by 1.25 gives C = ₦320. Common mistake: Treating the profit percentage as a deduction from the selling price directly instead of working from the base cost.

Students might select options like A, C, or D thinking they are excluded, but the Central Bank actually handles those duties. The Central Bank does not provide loans to individuals; instead, it focuses on monetary policy, issuing currency, and banking for commercial banks. Common mistake: Believing the central apex bank serves retail private customers.

Students might select option A or B because marketing and production are broad terms often associated with getting goods ready or promoted. Distribution involves transferring goods from producers to consumers through channels like wholesalers and retailers. Common mistake: Confusing the physical movement channel with the broader creation or promotion phases.

Students might select option A or C, thinking cooperatives have fast decisions or high profits, which contradicts reality. Cooperative societies often face limited access to capital due to reliance on members’ contributions. Common mistake: Assuming cooperative associations enjoy large-scale corporate financial backing.

Students might mistakenly choose option C by subtracting the 5% instead of adding it when currency value drops. First, determine the original cost as $10,000 multiplied by ₦400, which yields ₦4,000,000. When the Naira depreciates by 5%, the new exchange rate becomes ₦400 multiplied by 1.05, giving ₦420. Multiplying $10,000 by this new rate gives the new cost of ₦4,200,000. Common mistake: Reducing the exchange rate value during depreciation instead of increasing the local currency equivalent required.

Students might choose option D, a debit note, by confusing documents that increase or decrease invoice values. A credit note corrects an overcharge on an invoice, reducing the amount owed by the buyer. Common mistake: Mixing up credit notes and debit notes regarding whether they increase or decrease amounts.

Students might select option C because money and capital markets both deal with finance, leading to confusion over short-term versus long-term assets. The capital market facilitates the buying and selling of securities, such as stocks and bonds. Common mistake: Failing to distinguish between the money market and the capital market.

Students might select option C or D thinking a department store specializes narrowly or operates strictly in wholesale. A departmental store offers a wide variety of goods under one roof, organized into departments. Common mistake: Equating departmental stores with single-line specialty shops.

Students might pick option B by using current assets directly without accounting for inventory in the quick ratio calculation. Quick assets are derived by taking current assets of ₦180,000 and subtracting inventory of ₦60,000 to get ₦120,000. Dividing this figure by the current liabilities of ₦90,000 results in a quick ratio of 1.33:1. Common mistake: Forgetting to remove less liquid inventory from current assets when computing the acid-test or quick ratio.

Students might select option B, assuming the insured receives a pre-set payout regardless of the actual harm suffered. Indemnity ensures the insured is compensated only for the actual loss, restoring their pre-loss financial position. Common mistake: Treating insurance as a profit-making venture rather than a restoration mechanism.

Students might choose option A or C, which represent long-term capital sources rather than immediate financing needs. A bank overdraft is a short-term financing option, repayable on demand. Common mistake: Confusing long-term debt instruments with short-term bank credit facilities.

Students might select option B or D, which involve traditional brick-and-mortar store setups. E-commerce involves business transactions online without physical customer interaction. Common mistake: Assuming all retail formats require face-to-face store visits.

Students might select option A or D, mixing up sole proprietorships with limited liability companies. A sole proprietorship has unlimited liability, with the owner personally responsible for business debts. Common mistake: Assuming single owners enjoy protection from personal asset seizure.

Students might choose option B by multiplying only the par value and ignoring the share premium. The issue price per share is calculated by adding the par value of ₦50 to the premium of ₦10, giving ₦60. Multiplying this by 1,000 shares yields a total amount raised of ₦60,000. Common mistake: Forgetting to add the premium amount to the nominal value when calculating total proceeds.