EXCESS CAPACITY Williamson Industries has $8 billion in sales and $2.6 billion i

Question

EXCESS CAPACITY

Williamson Industries has $8 billion in sales and $2.6 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity.

What level of sales could Williamson Industries have obtained if it had been operating at full capacity? Write out your answer completely. For example, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent.
$ ______________

What is Williamson's target fixed assets/sales ratio? Round your answer to two decimal places.
________ %

If Williamson's sales increase 8%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer completely. For example, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent. Negative amount should be indicated by a minus sign. Do not round intermediate calculations.
$ ____________

Explanation / Answer

Sales at 95% capacity = $8000000000

Sales at 100% capacity = 8000000000/95% = 8421052631.57

Target Fixed Assets to Sales ration = 2.6/8 =32.5%

Revised Sales = 8000000000*108% = 8640000000

Required Fixed Assets = 8640000000*32.5% = 2808000,000

Required Increase in Fixed Assets = 2808000,000-2600000000 = $208,000,000

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