Answer:
1. $2,533,333,333
2. 15.39%
3. $136,458,000
Explanation:
1. The computation of sales level for full operating capacity is shown below:
= (Actual sales) ÷ (operating capacity)
= $1,900,000,000 ÷ 75%
= $2,533,333,333
2. The computation of the Target fixed assets sales ratio is shown below:
= Target fixed assets ÷ Full capacity sales
= $390,000,000 ÷ $2,533,333,333
= 15.39%
3. If sale increase by 35% so the new sales would be
= Sales + Sales × increase percentage
= $2,533,333,333 + $2,533,333,333 × 35%
= $2,533,333,333 + $886666667
= $3,420,000,000
So, increase in fixed assets = Target fixed assets sales ratio × (New sales - full capacity sales)
= 15.39% × ( $3,420,000,000 - $2,533,333,333)
= 15.39% × $886666667
= $136,458,000
