Last year Baron Enterprises had $350 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year.In millions, by how much could Baron's sales increase before it is required to increase its fixed assets?

Question

Quizplus · Accepted Answer

Baron's fixed assets were used at 65% of capacity, so to find the full capacity sales, divide the current sales by the utilization rate: $350 million / 0.65 = $538.46 million. The difference between full capacity sales and current sales is the amount by which sales can increase before needing more fixed assets: $538.46 million - $350 million = $188.46 million.

Last Year Baron Enterprises Had $350 Million of Sales, and It