2. Excess capacity adjustments

Osato Chemicals Inc. had sales of $1,820,000 last year on fixed assets of $345,000. Given that Osatos fixed assets were being used at only 96% of capacity, then the firms fixed asset turnover ratio was .

How much sales could Osato Chemicals Inc. have supported with its current level of fixed assets?

$1,516,666

$2,180,208

$1,895,833

$2,275,000

When you consider that Osatos fixed assets were being underused, what should be the firms target fixed assets to sales ratio?

20.93%

21.84%

18.20%

14.56%

Suppose Osato is forecasting sales growth of 21% for this year. If existing and new fixed assets are used at 100% capacity, the firms expected fixed assets turnover ratio for this year is ?