Kurt's Adventures is operating at full capacity with a sales level of $1,200 and fixed assets of $900. What is the required addition to fixed assets if sales are to increase by 20 percent?

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Quizplus · Accepted Answer

Kurt's Adventures needs to increase its fixed assets in proportion to the desired sales increase. Currently, the sales to fixed assets ratio is $1,200 / $900 = 1.33. To support a 20% increase in sales ($1,200 * 20% = $240), sales would be $1,440. The required fixed assets to support this would be $1,440 / 1.33 = $1,082. The additional fixed assets needed are $1,082 - $900 = $182, which is approximately $180.

Kurt's Adventures Is Operating at Full Capacity with a Sales