Last year National Aeronautics had a FA/Sales ratio of 40%, comprised of $250 mi

Question

Last year National Aeronautics had a FA/Sales ratio of 40%, comprised of $250 million of sales and $100 million of fixed assets. However, its fixed assets were used at only 75% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set?

a. 33.1% b. 28.5% c. 30.0% d. 31.5% e. 34.7%

Explanation / Answer

target FA/Sales ratio =40%*75%=30%

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