EXCESS CAPICITY: Williamson Industries has $7 billion in sales and $1.944 billion in fixed assets. Currently, the company’s fixed assets are operating at 90% of capacity.
a. What level of sales could Williamson Industries have obtained if it had been operating at full capacity?
b. What is Williamson’s target fixed assets/sales ratio?
c. If Williamson’s sales increase 15%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio?