Calculate the projected fixed assets needed given the following information: current sales = $1,000; current sales capacity = 90%; current fixed assets = $1,800; projected future sales = $1,250.
A) $225
B) $2025
C) 450
D) $4050
E) $675

Question

Quizplus · Accepted Answer

The current sales capacity utilization is 90%, meaning the current sales of $1,000 represent 90% capacity. To find the full capacity sales, divide $1,000 by 0.9, which equals approximately $1,111.11. The projected future sales are $1,250, which is an increase. To find the ratio of future sales to current full capacity sales, divide $1,250 by $1,111.11, which equals approximately 1.125. Since the fixed assets need to support sales, they should increase by the same ratio. Multiply the current fixed assets of $1,800 by 1.125 to get the projected fixed assets needed, which equals $2,025.

Calculate the Projected Fixed Assets Needed Given the Following Information