Question

Last year Baron Enterprises had $800 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year. In millions, by how much could Baron's sales increase before it is required to increase its fixed assets?

Select the correct answer.

A. $416.80 B. $430.80 C. $444.80 D. 423.80 E. 437.80

Answer 1

Answer: B. $430.80

Explanation:

Given : Last year Baron Enterprises had $800 million of sales.

It had $270 million of fixed assets that were used at 65% (=0.65) of capacity last year.

Now, the used asset =
`0.65*270=\$175.5`million

Now, Baron Enterprises had $800 million of sales in $175.5 million of assets , if we use all of $270 million of fixed assets , then the sales will be :-

`(800)/(175.5)*270=1230.76923077\approx1230.80\text{ million}`

Now, the increase in Baron's sales before it is required to increase its fixed assets =
`\$1230.80-$800=\$430.80\text{ millions}`

Hence, the increase in Baron's ( in million ) sales before it is required to increase its fixed assets = $430.80