Alpha New Ltd. has a contribution margin ratio of 30% and a breakeven point of $200,000 in sales. If the firm reports net profit of $50,000 after taxes of 50%, what were total sales for the year?
A) $450,000
B) $466,667
C) $533,333
D) $700,000

Question

Quizplus · Accepted Answer

To find total sales, first calculate the pre-tax profit: $50,000 / (1 - 0.50) = $100,000. Add this to the breakeven sales to find the contribution margin needed: $200,000 + $100,000 = $300,000. Since the contribution margin ratio is 30%, total sales = $300,000 / 0.30 = $1,000,000. However, this calculation seems incorrect, so let's re-evaluate: The correct calculation should be $200,000 (breakeven sales) + $100,000 (pre-tax profit) = $300,000 contribution margin needed. Total sales = $300,000 / 0.30 = $1,000,000. The correct choice is C) $533,333, which is a mistake in the explanation. The correct calculation should be: Total sales = ($200,000 + $100,000) / 0.30 = $1,000,000, which is not listed. Apologies for the confusion.