Walter Industries has $4 billion in sales and $1.7 billion in fixed assets. Curr
ID: 2716259 • Letter: W
Question
Walter Industries has $4 billion in sales and $1.7 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity.
a) What level of sales could Walter 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.
b) What is Walter's target fixed assets/Sales ratio? Round your answer to two decimal places.
c) If Walter's sales increase 15%, 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. Do not round intermediate calculations.
Explanation / Answer
Solution :
sales
4,000,000,000
fixed asset
1,700,000,000
current operating capacity
95.00%
a
level of sales could Walter Industries have obtained if it had been operating at full capacity
4,210,526,316
(sales / 95%)
b
Walter's target fixed assets/Sales ratio = (fixed assets / sales)
40.38%
c
sales = 4000000000 x 1.15
4,600,000,000
target fixed assets/Sales ratio
40.38%
fixed asset should be required (4600000000 x 40.38%)
1,857,250,000
increase in fixed assets will the company need (1857250000-1700000000)
157,250,000
sales
4,000,000,000
fixed asset
1,700,000,000
current operating capacity
95.00%
a
level of sales could Walter Industries have obtained if it had been operating at full capacity
4,210,526,316
(sales / 95%)
b
Walter's target fixed assets/Sales ratio = (fixed assets / sales)
40.38%
c
sales = 4000000000 x 1.15
4,600,000,000
target fixed assets/Sales ratio
40.38%
fixed asset should be required (4600000000 x 40.38%)
1,857,250,000
increase in fixed assets will the company need (1857250000-1700000000)
157,250,000
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