Question

Last year ABC Media had $425 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity. In millions of dollars, by how much could ABC Media's sales increase before it is required to increase its fixed assets?
$186.55
$201.92
$217.13
$228.85

Answer 1

Answer:

additional sales without adding the Fixed assets are $228.85 million

so correct option is d)  $228.85

Explanation:

given data

sales = $425,000,000

fixed assets = $270,000,000

capacity = 65%

to find out

how much could ABC Media's sales increase before it is required to increase its fixed assets

solution

we get here Sales at full capacity that is express as

Sales at full capacity = Actual sales ÷ capacity %   ..................1

put here value

Sales at full capacity = $\frac{425000000}{0.65}$

Sales at full capacity = $653846153.8

so sales without adding fixed assets will be

sales without adding fixed assets = Full capacity sales - Actual sales   ............2

put here value

sales without adding fixed assets = $653846153.8 - $425,000,000

sales without adding fixed assets = $228846153.8

so that additional sales without adding the Fixed assets are $228.85 million

so correct option is d)  $228.85