Question

EXCESS CAPACITY williamson Industries has $6 bilion in sales and $2.2 billion in foced assets. Curnently, the company's fed assets are operating at 90% of capacity a. what level of sales could Wiliamson Industries have obtained if it had been operating at full capacity? Write out your answer completely. For example, 25 bilion should be entered as 25.000.000.000. Reund vour aniwer to the nearest cent b What is Willamson's target foed assets/sales ratie? Raund your answer to tiwe decimal places If willamson's seles increase 14%, how large of an inerease in ed assets wil the company eeed te meet its target fed assets/sales ratio? write out yeur aner completely. For eample. 25 billon should be aered as 25.000.000.000 Round your aniver to the nearest cent. Negative ameunt shouid be indcared a minus sign De not round intemediate calculations

Answer 1

	a	Full capacity sales=Current Sales/Current Capacity utilization
		Sales at Full capacity =$6 billion/0.9=	$6,666,666,666.67
		Level of sales	$6,666,666,666.67
	b	Target Fixed Asset/Sales Ratio
		Fixed Assets/Sales=2.2billion/6666666666.67	0.33
	c	Fixed Asset Needed:
	A	Fixed Asset /Sales Ratio	0.33
	B	Sales =6 billion *1.14	$6,840,000,000.00
	C=A*B	Fixed Assets Required	$2,257,200,000.00
	D	Current Fixed Assets available	$2,200,000,000.00
	E=C-D	Increase in Fixed assets required	$57,200,000.00