Last year Wei Guan Inc.had $275 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?

Question

Quizplus · Accepted Answer

Wei Guan Inc. was operating at 65% capacity, so to find the full capacity sales, we divide the current sales by the current capacity utilization: $275 million / 0.65 = $423.08 million. This means the company could handle up to $423.08 million in sales with its current fixed assets. The difference between this full capacity sales level and the current sales level gives the increase in sales possible before needing more fixed assets: $423.08 million - $275 million = $148.08 million.

Last Year Wei Guan Inc