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30 September, 13:59

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)
  1. 30 September, 15:07
    0
    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.
  2. 30 September, 16:03
    0
    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
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