The Mill Press is operating at 94 percent of its fixed asset capacity and has current sales of $611,000. How much can the firm grow before any new fixed assets are needed?
A) 4.99 percent
B) 5.78 percent
C) 6.02 percent
D) 6.38 percent
E) 6.79 percent

Question

Quizplus · Accepted Answer

To find out how much the firm can grow before any new fixed assets are needed, we need to calculate the maximum sales that can be generated from the current fixed asset capacity, which is 100%.
Let X be the maximum sales possible with the current fixed assets, then:
X = $611,000 / 0.94 = $650,000 (rounded to the nearest thousand)
Therefore, the firm can grow by:
($650,000 - $611,000) / $611,000 = 0.0638 or 6.38%
The answer is D.

The Mill Press Is Operating at 94 Percent of Its