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15 November, 05:42

Hodgkiss Mfg., Inc., is currently operating at only 91 percent of fixed asset capacity. Current sales are $715,000. How fast can sales grow before any new fixed assets are needed? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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  1. 15 November, 06:00
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    Maximum sales Growth = 9.89 %

    Explanation:

    The question is solved by first determining the sales at full capacity.

    Sales at full capacity = current sales / current capacity

    =$715,000 / 0.91

    = $785,714.29.

    The sales growth before any new assets are added is:

    = sales at full capacity / current sales - 1

    = ($785,714.29 / $715,0000 - 1

    = 0.0989 or 9.89%.

    Therefore, the company's sales can grow at 9.89% before any new assets are added.
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