Question

Last year Baron Enterprises had $350 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year. In millions, by how much could Baron's sales increase before it is required to increase its fixed assets

Answer 1

Answer:

$188.46 million

Explanation:

Firstly, calculate sales at full capacity

Sales at full capacity = Sales at current capacity / % of capacity

Sales at full capacity = $350 million / 0.65

Sales at full capacity = $538.46 million

Increase in sales without increase in fixed assets = Sales at full capacity - Sales at current capacity

Increase in sales without increase in fixed assets = $538.46 million - $350 million

Increase in sales without increase in fixed assets = $188.46 million