Question

Earleton Manufacturing Company has $3 billion in sales and $600,000,000 in fixed assets. Currently, the company's fixed assets are operating at 85% of capacity. What level of sales could Earleton have obtained if it had been operating at full capacity

Answer 1

Answer:

$3,529 million

Explanation:

current sales level $3 billion at 85% of fixed assets operating capacity

if assets operate at full capacity, 100%, then total seals could be:

$3 billion / 0.85 = $3,529 million

Generally very few facilities operate at 100% of their capacity, since the operating capacity is determined before the facility starts to operate and must include the estimated future sales for several years, not just one year. Also, if everything works well, sales levels should increase on a yearly basis, so a little spare capacity is not such a bad thing.