If a firm's sales increase by 12%,and it has no spare capacity,it must increase fixed assets by at least:

Question

Quizplus · Accepted Answer

If the firm's sales increase by 12%, it implies a proportional increase in its revenue. If the firm has no spare capacity, it means that it has already utilized all its fixed assets. Therefore, to cope with the increased demand, the firm must increase its fixed assets by the same percentage as its increase in sales. Therefore, fixed assets must increase by 12%. Hence, the correct option is (D).

If a Firm's Sales Increase by 12%,and It Has No