M&M Tools is currently operating at 88 percent of capacity. All costs and net working capital vary directly with sales. What is the amount of the pro forma net fixed assets for next year if sales are projected to increase by 13 percent and the firm currently has $33,600 of net fixed assets?
A) $33,600
B) $33,412
C) $38,101
D) $37,968
E) $42,148

Question

Quizplus · Accepted Answer

Since net fixed assets do not vary directly with sales (only costs and net working capital do), the amount of pro forma net fixed assets for next year remains the same as the current amount, which is $33,600.

M&M Tools Is Currently Operating at 88 Percent of Capacity