Homework Answers
- We find out the sales that will be achieved when the fixed
assets are utilized 100%
- 90% utilization = $560,000 sales
- 100% utilization = 560,000/0.9 = $ 622,222.22 sales
- Next we find the growth rate in sales at 90% and 100%
utilization
- Increase = 622222.22-560000 = 62222.22.
- Growth = increase/90% utilization sales x 100
- Growth = 62222.22/560000 x 100
- Growth = 11.11%
- Therefore sales growth required is of 11.11% to make the capacity utilization as 100% and then only can we purchase new fixed assets
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