Seaweed Mfg., Inc., is currently operating at only 82 percent of fixed asset cap

Question

Seaweed Mfg., Inc., is currently operating at only 82 percent of fixed asset capacity. Fixed assets are $433,500. Current sales are $510,000 and projected to grow to $721,463.

How much in new fixed assets are required to support this growth in sales? Assume the company maintains its current operating capacity. (Do not round your intermediate calculations.)

$72,134

$65,892

$69,360

$179,744

$72,828

Seaweed Mfg., Inc., is currently operating at only 82 percent of fixed asset capacity. Fixed assets are $433,500. Current sales are $510,000 and projected to grow to $721,463.

Explanation / Answer

Sales at 100% capacity of current fixed assets = $510,000÷82% = $621,951.22

Fixed assets for $1 sales = $433,500÷$621,951.22 = $0.697

New fixed assets required = $0.697×$721,463-$433,500 = $69,360

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