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Aleonysh [2.5K]
3 years ago
14

EXCESS CAPACITY Williamson Industries has $7 billion in sales and $1.944 billion in fixed assets. Currently, the company’s fixed

assets are operating at 90% of capacity. What level of sales could Williamson Industries have obtained if it had been operating at full capacity? What is Williamson’s target fixed assets/sales ratio? If Williamson’s sales increase 15%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio?
Business
1 answer:
Lubov Fominskaja [6]3 years ago
8 0

Answer:

a. <u>Calculation of level of sales</u>

Level of sales = Sales / Operating capacity

= 7,000,000,000/90%

= $7,777,777,777.78

b. <u>Calculation of Target fixed Assets/Sales ratio</u>

Fixed assets sales ratio = Fixed assets / Level of sales

= 1,944,000,000/7,777,777,777.78

= 0.249942857

= 0.25

c. <u>Calculation of Increase in Fixed assets</u>

Increase in fixed assets = Fixed assets sales ratio * (Increase in sales - Level of sales)

= 0.249942857 * (7,000,000,000*1+15% - 7,777,777,777.78)

= 0.249942857 * (8,050,000,000 - 7,777,777,777.78)

= 0.249942857 * 272,222,222.222

= $68,040,000.

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