Answers
Requirement-(a), Full Capacity Sales
Full Capacity Sales = Current Sales / Percentage capacity of operation
= $5,000,000,000 / 0.95
= $5,263,157,894.74
Requirement (b), Target fixed assets/sales ratio
Fixed Assets / Sales Ratio = [Fixed Assets / Sales] x 100
= [$300,000,000 / $5,263,157,894.74] x 100
= 57.00%
Requirement (c), Increase in fixed assets will the company need to meet its target fixed assets/sales ratio
New Sales = $5,550,000,000 [$5,000,000,000 x 111%]
Sales at full capacity = $5,263,157,894.74
Therefore, the Increase in fixed assets will the company need to meet its target fixed assets/sales ratio = [New sales – Sales at full capacity] x Fixed Asset to sales ratio
= [$5,263,157,894.74 - $5,550,000,000] x 57.00%
= $286,842,105.26 x 57.00%
= $163,500,000
.