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Hodgkiss Mfg., Inc., is currently operating at only 89 percent of fixed asset capacity. Fixed assets...

Hodgkiss Mfg., Inc., is currently operating at only 89 percent of fixed asset capacity. Fixed assets are $416,000. Current sales are $520,000 and projected to grow to $619,326. How much in new fixed assets are required to support this growth in sales? Assume the company wants to operate at full capacity.

$26,208

$23,712

$79,461

$25,958

$24,960
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Homework Answers

Answer #1

Full Capacity Sales = Current Sales / Fixed assest capicity

= 520000 / 89%

=584269.66

Percentage of fixed asstes = Current Fixed assets / Full capacity sales

= 416000/ 584269.66

=0.71199648

Total fixed Assests Required = Percentage of fixed asstes X projected Sales

= 0.71199648 * 619326

=440957.932

New FIxed assets required = $440957.932 - $416000 = $24957.93 or say $24960 Aprrox

Correct answer is $24960

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