question archive Williamson Industries has $3 billion in sales and $2
Williamson Industries has $3 billion in sales and $2
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Williamson Industries has $3 billion in sales and $2.3 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity. a. What level of sales could Williamson Industries have obtained if it had been operating at full capacity? Write out your answer completely. For example, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent. $ b. What is Williamson's target fixed assets/sales ratio? Round your answer to two decimal places. % c. If Williamson's sales increase 10%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer completely. For example, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent. Negative amount should be indicated by a minus sign. Do not round intermediate calculations. $
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Sales = $3,000,000,000
Fixed asset = $2,300,000,000
Current operating capacity = 95%
a)
If the company operates at its full capacity, the sales will be
= Current sales/95%
= $3,000,000,000/95%
= $3,157,894,736.84
b)
Target fixed assets/Sales ratio = Fixed assets/Sales
= $2,300,000,000/$3,157,894,736.84
= 72.83%
c)
Increase in sales = 10%
New sales = $3,000,000,000(1+0.1) = $3,300,000,000
There will be no additional fixed asset required upto full capacity sales.
Increase in Fixed assets to meet the target fixed assets/sales Ratio
= (New Sales - Sales at full capacity) × Target fixed assets/sales rato
= ($3,300,000,000 - $3,157,894,736.84) × 72.83%
= $103,500,000
Increase in fixed assets to meet the target ratio is $103,500,000
