LaCroix Optical sales can be increased by $ 48.33 M without any increase to its existing fixed assets
last year sales is given. This sales is at 75% capacity. we need to find the sales at 100% capacity. now the unused 25% capacity will be the level of sales that can be increased without any increase to is FA.
b) additional financing needed by LaCroix Optical is $ 20M
the sales is expected to double. so we need to find the expected sales for the next year. The maximum sales possible from 100% capacity utilization of existing assets is already ascertained above. we need to find the difference between expected sales and maximum sales at 100% of existing Capacity. This will give the additional sales required- which will be possible only through additional capacity expansion.This value of additional assets will be the additional financing required
Additional FA or (finance) required = (Additional Sales Required / Sales at 100% capacity X Fixed Assets )