JAMB Commerce 2010
Questions & Answers

1) Distractor check: Option C or D might be picked if you forget to subtract the operating expenses or miscalculate the trade discount. 2) Reasoning to the answer: Calculate the trade discount as 10% of ₦80,000, which equals ₦8,000, making the actual cost price ₦80,000 - ₦8,000 = ₦72,000. Determine the gross profit by subtracting this cost price from the selling price of ₦100,000 to get ₦28,000. Finally, subtract the operating expenses of ₦12,000 from the gross profit to arrive at a net profit of ₦20,000. Common mistake: Treating the initial list price as the cost price without deducting the trade discount.

1) Distractor check: Option B or D might be chosen if you confuse utmost good faith with the principles of insurable interest or indemnification. 2) Reasoning to the answer: Understand that uberrimae fidei translates to the doctrine of utmost good faith in insurance contracts. This principle legally obligates both the insurer and the insured to fully and honestly disclose all material facts relevant to the risk. Failing to uphold this mutual transparency can render the contract void. Common mistake: Confusing disclosure requirements with the principle of indemnity.

1) Distractor check: Option A or B might be selected if you add or subtract the stock values in the wrong sequence. 2) Reasoning to the answer: Apply the standard accounting formula for the cost of goods sold, which is opening stock plus purchases minus closing stock. Substitute the given values into this formula: ₦35,000 (opening stock) + ₦115,000 (purchases) - ₦45,000 (closing stock). Sum the opening stock and purchases to get ₦150,000, then subtract the closing stock to arrive at the final cost of goods sold of ₦105,000. Common mistake: Adding the closing stock instead of subtracting it from the total.

1) Distractor check: Option A or C might be chosen if you confuse development banking with central banking functions. 2) Reasoning to the answer: Recognize that development banks are specialized financial institutions created to support economic growth. Their primary purpose is financing long-term projects such as large-scale infrastructure and industrial development, distinguishing them from commercial banks which focus on short-term lending. Common mistake: Assuming development banks manage the national currency like a central bank.

1) Distractor check: Option C or D might be picked if you multiply by the rate change alone instead of calculating the total new cost difference. 2) Reasoning to the answer: Calculate the original cost in Naira by multiplying $5,000 by the initial exchange rate of ₦450, yielding ₦2,250,000. Next, calculate the new cost using the updated exchange rate of ₦465, giving $5,000 × ₦465 = ₦2,325,000. Find the increase in Naira cost by subtracting the original total from the new total: ₦2,325,000 - ₦2,250,000 = ₦75,000. Common mistake: Multiplying the dollar amount directly by the difference in exchange rates without computing the totals first.

1) Distractor check: Option B or C might be selected if you mistake specialized storage facilities for general warehouses. 2) Reasoning to the answer: Differentiate between standard and specialized warehousing facilities. Cold storage, bonded, and automated warehouses all serve specialized functions for specific goods or regulatory needs, whereas general merchandise warehouses handle a wide variety of unspecialized consumer goods. Common mistake: Assuming general merchandise warehouses require specialized climate controls.

1) Distractor check: Option B or D might be chosen if you divide instead of multiplying when applying the current ratio. 2) Reasoning to the answer: Recall that the current ratio is defined as current assets divided by current liabilities. Rearrange this formula to solve for current assets by multiplying the current ratio by the current liabilities. Substituting the given values yields 1.5 × ₦60,000, which calculates out to current assets of ₦90,000. Common mistake: Dividing current liabilities by the current ratio instead of multiplying.

A student might incorrectly choose bulky raw materials like coal or perishable agricultural products, assuming all goods require similar freight networks, or mistake high-value manufactured goods as the main cargo. To reach the correct option, consider the physical state of the materials handled by this infrastructure. Pipelines efficiently transport liquid and gaseous commodities, like oil and gas, over long distances. Common mistake: Confusing solid bulk freight transport with fluid network conveyance.

One might mistakenly pick ₦23,200 by calculating simple interest instead of compound interest, or miscalculate the powers to arrive at ₦23,360 or ₦23,328 incorrectly. To determine the correct amount, apply the compound interest formula A = P(1 + r/n)^(nt) where P equals ₦20,000, r equals 0.08, n equals 1, and t equals 2. Substituting these values gives A = ₦20,000 multiplied by (1.08)^2, which simplifies to ₦20,000 multiplied by 1.1664, resulting in ₦23,328. Common mistake: Applying simple interest formulas instead of compounding annual growth.

A student might think private companies allow free transfers or public offerings, confusing them with public companies. The correct option is derived by examining ownership rules: private limited companies restrict share transfers, unlike public limited companies, which allow free transfer and public offerings. Common mistake: Mixing up the share distribution and transfer rules of public versus private firms.

A test-taker might select a demand for payment or a conditional order to pay, confusing it with an invoice or bill of exchange. Evaluating the instrument reveals that a promissory note is a written promise to pay a specific sum to the payee at a future date, used in credit transactions. Common mistake: Treating a promise to pay as a demand for immediate settlement.

A student could mistakenly select ₦3,780 by applying the surcharge to the total annual premium without dividing, or choose ₦1,800 by forgetting the surcharge entirely. To find the cost per installment, first compute the half-yearly premium as ₦3,600 divided by 2, which equals ₦1,800. Next, calculate the 5% surcharge on that half-yearly amount as 5 percent of ₦1,800, giving ₦90, and add this to the installment to get ₦1,800 plus ₦90, totaling ₦1,890. Common mistake: Forgetting to split the total annual amount into half-yearly portions before adding the percentage surcharge.

A learner might mistakenly select highlighting product advantages or providing product feature details, assuming any promotion is inherently deceptive. Looking at ethical standards, aggressive advertising that misleads consumers is unethical, violating fair marketing practices. Common mistake: Assuming all forms of aggressive promotion cross ethical lines regardless of truthfulness.

A student might incorrectly pick ₦250,000 by treating the debt-to-equity ratio as equal parts or using the wrong multiplier. By letting Equity equal E and Liabilities equal 0.5E, we know that total assets equal Liabilities plus Equity, so 0.5E plus E equals ₦750,000. Solving 1.5E equals ₦750,000 yields E equal to ₦500,000. Common mistake: Failing to combine assets and liabilities correctly using the given ratio proportions.

One might mistakenly select planning or leading, confusing general strategic mapping with structural setup. The correct function is identified by looking at resource deployment: organizing defines roles, structures, and allocates resources to achieve goals. Common mistake: Confusing the initial goal-setting phase of planning with the structural setup of organizing.

A test-taker might mistakenly select ₦175 by subtracting an incorrect percentage or picking ₦250 by adding the profit instead of subtracting. To find the cost price, compute the gross profit as 0.25 multiplied by the selling price of ₦200, which equals ₦50, and then subtract this from the selling price to get ₦200 minus ₦50, resulting in ₦150. Common mistake: Adding the gross profit amount to the selling price instead of subtracting it to find the cost.

A student might mistakenly think new entrepreneurs enjoy guaranteed capital access or established brand loyalty, overlooking the realities of business startup hurdles. Examining market dynamics shows that new entrepreneurs face intense competition and market uncertainty, hindering market entry. Common mistake: Assuming startups immediately secure stable market positioning and easy funding.

A student might pick ₦400,000 by only subtracting cost of goods sold or ₦300,000 by stopping at gross profit. To calculate profit before tax, first find gross profit by subtracting cost of goods sold from revenue (₦500,000 minus ₦200,000 equals ₦300,000), then subtract operating expenses to get operating profit (₦300,000 minus ₦100,000 equals ₦200,000), and finally deduct interest expense (₦200,000 minus ₦20,000) to arrive at ₦180,000. Common mistake: Omitting operating or interest expenses when calculating pre-tax earnings.

A candidate might mistakenly choose trade tariffs or government spending, confusing monetary policy with fiscal or trade policy. The right tool is found by looking at central banking levers: adjusting reserve requirements is a monetary policy tool to control money supply. Common mistake: Confusing central bank monetary tools with fiscal policy actions like taxes or spending.

A student might choose 126% or 106% by confusing index values directly with percentages. The inflation rate is found using the formula [(126 minus 120) divided by 120] multiplied by 100, which evaluates to (6 divided by 120) multiplied by 100, yielding 5%. Common mistake: Using the raw index value instead of calculating the percentage change.