Question

North Construction had $850 million of sales last year, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate North could achieve before it had to increase its fixed assets

Answer 1

Maximum Sales Growth Rate = 66.67%

Step-by-step explanation:

The question is to determine the maximum sales growth in percentage which North Construction could achieve before it had to increase its fixed assets

What is the sales at the 60% Capacity $850,000,000

Therefore, sales at 100% capacity

= (Sales at 60% Capacity x 100%) / 60%

= ($850,000,000 x 100) / 60

= $1, 416, 666, 666.67

Also, based on the figure what is the Growth in sales for unused capacity of 40%

= Sales at 100% - Sales at 60%

= $1, 416, 666, 666.67- $850,000,000

= $566, 666, 666.67

Finally, what is the growth rate of this unused capacity

= Sales @40% capacity / Sales @ 60% capacity x 100

= $566, 666, 666.67/ $850,000,000 x 100

= 66.67%