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18 December, 11:34

Quantitative Problem 2: Mitchell Manufacturing Company has $1,900,000,000 in sales and $390,000,000 in fixed assets. Currently, the company's fixed assets are operating at 75% of capacity. What level of sales could Mitchell have obtained if it had been operating at full capacity? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What is Mitchell's Target fixed assets/Sales ratio? Do not round intermediate calculations. Round your answer to two decimal places. % If Mitchell's sales increase 35%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio? Do not round intermediate calculations. Round your answer to the nearest do

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  1. 18 December, 12:21
    0
    1. $2,533,333,333

    2. 15.39%

    3. $136,458,000

    Explanation:

    1. The computation of sales level for full operating capacity is shown below:

    = (Actual sales) : (operating capacity)

    = $1,900,000,000 : 75%

    = $2,533,333,333

    2. The computation of the Target fixed assets sales ratio is shown below:

    = Target fixed assets : Full capacity sales

    = $390,000,000 : $2,533,333,333

    = 15.39%

    3. If sale increase by 35% so the new sales would be

    = Sales + Sales * increase percentage

    = $2,533,333,333 + $2,533,333,333 * 35%

    = $2,533,333,333 + $886666667

    = $3,420,000,000

    So, increase in fixed assets = Target fixed assets sales ratio * (New sales - full capacity sales)

    = 15.39% * ($3,420,000,000 - $2,533,333,333)

    = 15.39% * $886666667

    = $136,458,000
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Home » Business » Quantitative Problem 2: Mitchell Manufacturing Company has $1,900,000,000 in sales and $390,000,000 in fixed assets. Currently, the company's fixed assets are operating at 75% of capacity.
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