Miller Bros.Hardware is operating at full capacity with a sales level of $689,700 and fixed assets of $468,000.The profit margin is 7 percent.What is the required addition to fixed assets if sales are to increase by 10 percent?
A)$3,276
B)$4,680
C)$28,400
D)$32,760
E)$46,800

Question

Quizplus · Accepted Answer

Required addition to fixed assets = $468,000 × 0.10 = $46,800Or, Capital intensity ratio = $468,000/$689,700 = 0.678556Required addition to fixed assets = $689,700 × 0.10 × 0.678556 = $46,800