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Sales level at full capacity, fixed assets/sales ratio

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Walter Industries has $5 billion in sales and $1.7 billion in fixed assets. Currently, the company's fixed assets are operating at 90% of capacity.

a. What level of sales could Walter Industries have obtained if it had been operating as full capacity?
b. What is Walter's Target fixed assets/Sales ratio?
c. If Walter's sales increase 12%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio?

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Solution Summary

The solution explains how to calculate the full capacity sales and the fixed assets/sales ratio

Solution Preview

a. The assets are operating at 90% capacity, so full capacity sales would be 5/.9 = $5.56 ...

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