Calculate the projected fixed assets needed given the following information: current sales = $25,000; current sales capacity = 80%; current fixed assets = $15,000; projected future sales = $40,000.
A) $5,000
B) $20,200
C) $4,200
D) $19,200
E) $5,200

Question

Quizplus · Accepted Answer

The current sales capacity utilization is 80%, meaning the full capacity sales could be $25,000 / 0.80 = $31,250. To support $40,000 in sales, the company needs fixed assets in the same proportion as current sales to full capacity sales. So, the projected fixed assets needed are $15,000 / $31,250 * $40,000 = $19,200.

Calculate the Projected Fixed Assets Needed Given the Following Information