thorpe mfg., inc., is currently operating at only 76 percent of fixed asset capacity. current sales are $600,000. how fast can sales grow before any new fixed assets are needed?

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10-12-2022
Business

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thorpe mfg., inc., is currently operating at only 76 percent of fixed asset capacity. current sales are $600,000. how fast can sales grow before any new fixed assets are needed?

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varshamittal029 varshamittal029 · Answer 1 · 2022-12-16T11:08:27+01:00

There should be an increase in sales of $189,473.68.

A business raises money to buy assets that are later used to make money (sales). Utilizing fixed assets effectively is crucial because as utilisation rises, so will sales and profits. The business will require new assets to increase revenue once the current ones have been fully exploited.

We know that,

Full capacity sales = Current sales ÷ Current capacity

It is given that,

Current sales = $600000

Current capacity = 76% = 0.76

Thus,

Full capacity sales = Current sales ÷ Current capacity

= $600000 ÷ 0.76

= 7,89,473.68

Thus, there is a need to increase the sales by $1,89,473.68 i.e. $789473.68 - $600000

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