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Difficulty: Very hardCooperative Societies: Types, Principles, Features, and Operation

A Consumer Cooperative Society realized a net surplus of 1,200,0001,200,000 Naira at the end of its financial year. Member X holds 100,000100,000 Naira in share capital (representing 10%10\% of the total share capital) and made purchases worth 500,000500,000 Naira during the year (representing 20%20\% of total member purchases). In accordance with Rochdale principles, the society allocates a 5%5\% fixed interest on share capital and distributes the remaining surplus as patronage dividend. What is the total financial payout Member X will receive?

  1. 235,000 NairaAnswer
  2. B
    120,000 Naira
  3. C
    245,000 Naira
  4. D
    230,000 Naira

Answer

Member X will receive a total financial payout of 235,000 Naira.
The correct answer accounts for both cooperative surplus rules: limited interest on capital and distribution of residual surplus based on patronage volume. Member X gets 5,000 Naira interest on capital plus 230,000 Naira from the remaining patronage pool, totaling 235,000 Naira.

Step-by-Step Solution

1
Calculate Member X's fixed interest on share capital
5% of 100,000 Naira = 5,000 Naira
Cooperative societies pay a strictly limited/fixed interest rate on share capital.
2
Determine total share capital and total interest paid out by the society
Total share capital = 1,000,000 Naira (since 100,000 Naira is 10%). Total interest pool = 5% of 1,000,000 Naira = 50,000 Naira.
Capital interest must be subtracted from the total surplus before distributing the patronage dividend.
3
Calculate remaining net surplus available for patronage dividend
1,200,000 Naira - 50,000 Naira = 1,150,000 Naira
Patronage dividend is paid only from the residual surplus following capital interest deductions.
4
Calculate Member X's patronage dividend based on member purchases proportion
20% of 1,150,000 Naira = 230,000 Naira
Rochdale principles state that cooperative surplus is shared in proportion to members' patronage/purchases.
5
Sum Member X's capital interest and patronage dividend
5,000 Naira + 230,000 Naira = 235,000 Naira
The total payout combines fixed reward on capital and patronage rebate.

Key Concept

Cooperative Surplus Distribution and Rochdale Principles
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Topics

Cooperative Societies: Types, Principles, Features, and Operation

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