Excess capacity Edney Manufacturing Company has $2 billion in sales and $0.8 bil
ID: 2628262 • Letter: E
Question
Excess capacity
Edney Manufacturing Company has $2 billion in sales and $0.8 billion in fixed assets. Currently, the company's fixed assets are operating at 85% of capacity.
Excess capacity
Edney Manufacturing Company has $2 billion in sales and $0.8 billion in fixed assets. Currently, the company's fixed assets are operating at 85% of capacity.
- What level of sales could Edney have obtained if it had been operating at full capacity? Enter your answer in millions. For example, an answer of $5 billion should be entered as 5,000. Round your answer to two decimal places.
$ million - What is Edney's Target fixed assets/Sales ratio? Round your answer to two decimal places.
% - If Edney's sales increase 30%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest cent.
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Explanation / Answer
1) What level of sales could Edney have obtained if it had been operating at full capacity? Enter your answer in millions. For example, an answer of $5 billion should be entered as 5,000. Round your answer to two decimal places.
Answer
The Level of sales could Edney have obtained if it had been operating at full capacity = 2000/85%
The Level of sales could Edney have obtained if it had been operating at full capacity = $ 2352.94 Million
2) What is Edney's Target fixed assets/Sales ratio? Round your answer to two decimal places.
Answer
Target fixed assets/Sales ratio = Fixed assets/Sales
Target fixed assets/Sales ratio = 0.8/2.35294
Target fixed assets/Sales ratio = 0.34
3) If Edney's sales increase 30%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest cent.
Answer
Increase in Sales = 30%*2,000,000,000 = 600,000,000
Total Sales = 2,000,000,000 + 600,000,000 = 2,600,000,000
Total fixed Asset required to meet its Target fixed assets/Sales ratio = 2,600,000,000* 0.34 = 884,000,000
Increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio = 884,000,000 - 800,000,000
Increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio =$ 84,000,000
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