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Question : Thorpe Mfg., Inc., currently operating at only 86 percent of

Thorpe Mfg., Inc., is currently operating at only 86 percent of fixed asset capacity. Current sales are $320,000. How fast can sales grow before any new fixed assets are needed? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Thorpe Mfg., Inc., is currently operating at only 86 percent of fixed asset capacity. Current sales are $320,000. How fast can sales grow before any new fixed assets are needed? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |

Solution

Current Sales are $320,000. This is 86% of fixed asset capacity. To find the sales at maximum 100% capacity we divide $320,000 by 0.86 which gives $372,093.

Additional sales required to acheive maximum sales will be $372,093 - $320,000 = $52,093

The maximum sales growth as a percentage would be $52,093 / $320,000 = 0.1628 or 16.28%

Thus Maximum sales growth : 16.28