Hercules Ltd. sold $200,000 of lumber in the last year. They were operating at 94% of...

Hercules Ltd. sold $200,000 of lumber in the last year. They were operating at 94% of fixed capacity and current sales are $350,000, how fast can the company grow before any new fixed assets are needed?

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Expert Solution

Full capacity sales = Current sales / Capacity

Full capacity sales = $350,000 / 0.94

Full capacity sales = $372,340.426

Maximum sales growth = (Full capacity sales / Current sales) - 1

Maximum sales growth = ($372,340.426 / $350,000) - 1

Maximum sales growth = 0.0638 or 6.38%

jeff jeffy answered 2 years ago

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