Using the excess capacity scenario model, determine the percentage by which sales increase by given the following information: current sales = $5,000; sales capacity level = 85%.
A) 17.65%
B) 15.00%
C) 13.75%
D) 11.25%
E) 10.65%

Question

Quizplus · Accepted Answer

The excess capacity scenario model suggests that sales can increase up to the full capacity without incurring additional fixed costs. If current sales are at 85% capacity, reaching 100% capacity represents an increase. The percentage increase from 85% to 100% is calculated as (100% - 85%) / 85% = 15% / 85% = 0.1765 or 17.65%.

Using the Excess Capacity Scenario Model, Determine the Percentage by Which