Seaweed Mfg.,Inc.is currently operating at only 86 percent of fixed asset capacity.Fixed assets are $387,000.Current sales are $510,000 and are projected to grow to $664,000.What amount must be spent on new fixed assets to support this growth in sales?
A)$0
B)$22,654
C)$46,319
D)$79,408
E)$93,608

Question

Quizplus · Accepted Answer

Full capacity sales = $510,000/0.86 = $593,023.26Capital intensity ratio = $387,000/$593,023.26 = 0.652588231Fixed asset need = ($664,000 × 0.652588231) - $387,000 = $46,319