Question

Last year Baron Enterprises had $800 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year. In millions, by how much could Baron's sales increase before it is required to increase its fixed assets?
Select the correct answer.

A. $416.80 B. $430.80 C. $444.80 D. 423.80 E. 437.80

Answer 1

Answer: B. $430.80

Step-by-step explanation:

Given : Last year Baron Enterprises had $800 million of sales.

It had $270 million of fixed assets that were used at 65% (=0.65) of capacity last year.

Now, the used asset = $0.65\times270=\ 175.5$million

Now, Baron Enterprises had $800 million of sales in $175.5 million of assets , if we use all of $270 million of fixed assets , then the sales will be :-

$\dfrac{800}{175.5}\times270=1230.76923077\approx1230.80\text{ million}$

Now, the increase in Baron's sales before it is required to increase its fixed assets = $\ 1230.80- 800=\ 430.80\text{ millions}$

Hence, the increase in Baron's ( in million ) sales before it is required to increase its fixed assets = $430.80