P4-17 Fixed Assets and Capacity Usage [LO1] Seaweed Mfg., Inc., is currently ope

Question

P4-17 Fixed Assets and Capacity Usage [LO1]

Seaweed Mfg., Inc., is currently operating at only 82 percent of fixed asset capacity. Fixed assets are $380,700. Current sales are $470,000 and projected to grow to $647,683.

How much in new fixed assets are required to support this growth in sales? Assume the company maintains its current operating capacity. (Do not round your intermediate calculations.)

which of the following is the answer

$49,491

$143,923

$51,471

$47,016

$51,966

Seaweed Mfg., Inc., is currently operating at only 82 percent of fixed asset capacity. Fixed assets are $380,700. Current sales are $470,000 and projected to grow to $647,683.

Explanation / Answer

Sales at 100% operating capacity = $470,000÷82% = $573,170

Sales per dollar of assets:

= $573,170/$380,700

= $1.50

New fixed assets = Fixed assets required-Old fixed assets

= [$647,683÷$1.50]-$380,700

= $49,654

Correct option is $49,491. (Rounding off error)

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