Mitchell Manufacturing Company has $1,600,000,000 in sales and $210,000,000 in f
ID: 2783135 • Letter: M
Question
Mitchell Manufacturing Company has $1,600,000,000 in sales and $210,000,000 in fixed assets. Currently, the company's fixed assets are operating at 75% of capacity.
A) What level of sales could Mitchell have obtained if it had been operating at full capacity? Round your answer to the nearest dollar. Do not round intermediate calculations. $ ?????????
B) What is Mitchell's Target fixed assets/Sales ratio? Round your answer to two decimal places. Do not round intermediate calculations. %?????????
C) If Mitchell's sales increase by 40%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio? Round your answer to the nearest dollar. Do not round intermediate calculations. $???????????
Explanation / Answer
A) Fixed Assets of the company = 210,000,000
Sales of the company when its operating at 75 % = 1,600,000,000
Thus Sales at 100% Capacity = 1,600,000,000 / 0.75 * 1 = 2,133,333,333
B) Target fixed assets/Sales ratio = ixed assets/Sales at 100% Capacity = 210,000,000 / 2,133,333,333 = 0.09843 which when rounded to 2 decimal places we get 0.1
c) When the Sales increases by 40%, the sales would be 1,600,000,000 * 1.4 = 2,240,000000
Now my target fixed assets/Sales ratio = 0.1, Thus the Total Fixed assets will be 0.1 * 2,240,000000 = 224,000,000. Thus the increase in fixed assets will be 224,000,000 - 210,000,000 = 14,000,000