Last year Handorf-Zhu Inc.had $850 million of sales,and it had $425 million of fixed assets that were used at only 60% 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

The maximum sales growth rate before needing to increase fixed assets can be calculated by determining how much more sales the current fixed assets can support at full capacity. Since the assets were used at only 60% of capacity for $850 million in sales, at 100% capacity, they could support $850 million / 0.60 = $1,416.67 million in sales. The maximum growth rate is then (($1,416.67 million - $850 million) / $850 million) * 100% = 66.67%.

Last Year Handorf-Zhu Inc