Walter Industries has $3 billion in sales and $2.2 billion in fixed assets. Curr

Question

Walter Industries has $3 billion in sales and $2.2 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity.

What level of sales could Walter Industries have obtained if it had been operating at full capacity? Write out your answer completely. For example, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent.
$  

What is Walter's target fixed assets/Sales ratio? Round your answer to two decimal places.
%

If Walter's sales increase 15%, 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, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent.
$  

Explanation / Answer

Hi,

Please find the correct answers as follows:

1. Level of sales at full capcity:

Sales at 95% capacity = 3000000000

Therefore sales at 100% capacity = 3000000000/95%

=$3,157,894,736.84

hence, $3,157,894,736.84 is the sales at 100% capacity

----------------

target fixed assets/Sales ratio:

Fixed assets at full capacity/ Sales at full Capacity

=2200000000/3157894736.84

=0.70

-------------------------

New Sales = 3000000000*1.15

=$3450000000

New fixed assets = 0.70*3450000000

=$2415000000

Therefore increase in assets = (2415000000-2200000000)

=$215000000

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