Last year Handorf-Zhu Inc.had $850 million of sales,and it had $425 million of fixed assets that were used at only 90% of capacity.What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?

Question

Quizplus · Accepted Answer

Since Handorf-Zhu Inc. was operating at only 90% of capacity, it means they could increase their operations to 100% without acquiring new fixed assets. The current sales are $850 million, and the fixed assets are $425 million. To find the maximum sales growth rate before needing new fixed assets, we calculate the additional capacity available: 10% (since they are at 90% capacity). To find the maximum sales growth, we calculate $850 \times \frac{10}{90} = 94.44$ million more in sales. The growth rate is then $\frac{94.44}{850} \times 100 = 11.11\%$.

Last Year Handorf-Zhu Inc