Question

Earleton Manufacturing Company has $2 billion in sales and $500,000,000 in fixed assets. Currently, the company's fixed assets are operating at 75% of capacity. What level of sales could Earleton have obtained if it had been operating at full capacity

Answer 1

Level of sales at full capacity = $2,666,666,666.67

Step-by-step explanation:

75 % of fixed assets = 500,000,000

1% = 500,000,000/75

100% of fixed asset= 500,000,000/75 × 100 = 666,666,666.67

Fixed assets at 100% capacity = 666,666,666.67

If $500,000,000 worth of fixed asset = $ 2,000,000,000 sales

$1 fixed asset = (2,000,000,000 / 500,000,000 ) sales

Then 666,666,666.67 fixed asset would produces

(2,000,000,000/ 500,000,000) × 666,666,666.67= 2,666,666,666.67 sales

Level of sales at full capacity = $2,666,666,666.67