Alter Bridge Mfg., Inc., is currently operating at only 95 percent of fixed asset capacity. Current sales are $880,000. Fixed assets are $520,000 and sales are projected to grow to $930,000. How much in new fixed assets are required to support this growth in sales? Assume the company maintains its current operating capacity

Question

Business

Ciara Pace

7 December, 20:53

Alter Bridge Mfg., Inc., is currently operating at only 95 percent of fixed asset capacity. Current sales are $880,000. Fixed assets are $520,000 and sales are projected to grow to $930,000. How much in new fixed assets are required to support this growth in sales? Assume the company maintains its current operating capacity

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Answers (2)

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Jorge Barnett · Answer 1

The total fixed assets required to support the growth in sales=$549,545.45

Explanation:

The new fixed assets required to support this growth in sales can be calculated using the expression;

Ratio=current fixed assets/current sales

where;

Current sales=$880,000

Current fixed assets=$520,000

replacing;

Ratio = (520,000/880,000) = 0.591

To calculate the new fixed assets to support the current growth in sales

Ratio=new fixed assets/new projected sales

where;

New fixed assets=x

New projected sales=$930,000

Ratio=0.591

replacing;

New fixed assets=Ratio*new projected sales

New fixed assets = (0.591*930,000)

New fixed assets=$549,545.45

The total fixed assets required to support the growth in sales=$549,545.45

Kaelyn Ingram · Answer 2

USD 2064.8/-

Explanation:

Full load sales = USD 880,000/0.95 = USD 926315.79

To get new level of F. A (fixed assets), we need to be sure to find the current percentage of F. A to full capacity sales.

To do so, we first find;

F. A / Full capacity/load sales:

= 520000 / 926315.79

= 0.56136 or 56.13%

Now, we find the total USD amount of F. A which is needed at new sales:

Total fixed assets = 0.56136 x USD 930000

= USD 522064.80

Now the required investment:

sales - current fixed assets:

= USD 522064.80 - USD 520,000

= USD 2064.8

We get new fixed assets.