O Level Accounting (7707)•7707/11/M/J/23
Explanation
Determining Total Sales from Credit and Cash Components
Steps:
- Cash sales are 10% of total sales, so credit sales are 90% of total sales.
- Total sales = credit sales ÷ 0.9 = 40,000.
- Net profit margin is 30% of total sales.
- Net profit = 0.3 × 12,000.
Why D is correct:
- Net profit equals 30% of total sales ($40,000), per the profit margin formula.
Why the others are wrong:
- A: Applies 30% to $32,400 (underestimates total sales).
- B: Applies 30% to $33,333 (ignores cash sales proportion).
- C: Applies 30% to $39,600 (slight miscalculation of total sales).
Final answer: D
Topic: Calculation and understanding of accounting ratios
Practice more O Level Accounting (7707) questions on mMCQ.me