Excess capacity Edney Manufacturing Company has $3 billion in sales and $0.7 bil
ID: 2722659 • Letter: E
Question
Excess capacity
Edney Manufacturing Company has $3 billion in sales and $0.7 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 35%, 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.
$
Excess capacity
Edney Manufacturing Company has $3 billion in sales and $0.7 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 35%, 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.
$
Explanation / Answer
Sales = $3 Bn
Fixed assets = $0.7 Bn
maximum sales would be = 3/.85 =3.529
Target fixed assets/ Sales = Fixed asets/ Sales =0.7/3.529 =0.198
If sales increase by 35% = 3*1.35 =4.05
Then fixed assets = target ratio*4.05 =0.8019
Hence an increase of $0.8019- $0.7 = $0.1019 Bn
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