Alter Bridge Mfg., Inc., is currently operating at only 85 percent of fixed asse

Question

Alter Bridge Mfg., Inc., is currently operating at only 85 percent of fixed asset capacity. Current sales are $640,000. Fixed assets are $400,000 and sales are projected to grow to $810,000. How much in new fixed assets are required to support this growth in sales? Assume the company maintains its current operating capacity.

Alter Bridge Mfg., Inc., is currently operating at only 85 percent of fixed asset capacity. Current sales are $640,000. Fixed assets are $400,000 and sales are projected to grow to $810,000. How much in new fixed assets are required to support this growth in sales? Assume the company maintains its current operating capacity.

Explanation / Answer

Fixed Assets 400000 Sales 640000 Sales 810000 400000*810000/640000 506250 Increase in Fixed Assets Required 506250-400000 106250 $ 106250 must be invested to support the growth in Sales

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