Question

In 2014, Firm X made $500 in sales with $1,200 in fixed assets. Suppose the firm had been operating at 75% of fixed asset capacity. If the firm can increase operating capacity to 85%, how much more in fixed assets would the firm need to achieve $650 in sales?

Answer 1

Firm X will need $568 in fixed assets, arising the total amount to 1,768.

Step-by-step explanation:

Applying the double rule of three:

1,200 – 500 – 0.75

X – 650 – 0.85

Then:

1,200/X= (500/650)*(0.75/0.85)

X = 1,200 / ((500/650)*(0.75/0.85))

X= 1,768

The increase in fixed asset is:

1,768 – 1,200 = 568