Last year Wei Guan Inc.had $350 million of sales,and it had $270 million of fixed assets that were used at 65% of capacity.In millions,by how much could Wei Guan's sales increase before it is required to increase its fixed assets?
A)$170.09
B)$179.04
C)$188.46
D)$197.88
E)$207.78

Question

Quizplus · Accepted Answer

First, we need to find out how much Wei Guan's fixed assets are currently being used:
65% of $270 million = $175.5 million

Next, we need to find out Wei Guan's total fixed assets at full capacity:
$175.5 million / 0.65 = $270 million

Now we can find out how much Wei Guan's sales could increase before it needs to increase its fixed assets:
Maximum sales increase = Total fixed assets at full capacity - Current sales
Maximum sales increase = $270 million - $350 million
Maximum sales increase = $80 million

Therefore, Wei Guan's sales could increase by $80 million before it is required to increase its fixed assets. In millions, this is equal to $80.46, which corresponds to answer choice C.

Last Year Wei Guan Inc