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Hodgkiss Mfg., Inc., is currently operating at only 91 percent of fixed asset capacity. Current sales are $715,000. How fast can sales grow before any new fixed assets are needed? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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Answer:

Maximum sales Growth = 9.89 %

Explanation:

The question is solved by first determining the sales at full capacity.

Sales at full capacity= current sales/ current capacity

=$715,000/ 0.91

= $785,714.29.

The sales growth before any new assets are added is:

= sales at full capacity/ current sales -1

= ($785,714.29/ $715,0000 -1

= 0.0989 or 9.89%.

Therefore, the company’s sales can grow at 9.89% before any new assets are added.

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