Full-Capacity Sales: Blue Sky Mfg., Inc., is currently operating at 90 percent of fixed asset capacity. Current sales are $575,000. How much can sales increase before any new fixed assets are needed?

Fixed Asset Capacity = 90%

Current Sales = $575,000

Full Cpaacity Sales = $575,000 / 0.90 = $638,889

Sales must grow by: $638,889 $575,000 = $63,889

% of Growth in Sales: $63,889 / $575,000 = 0.1111 (11.11%)

Fixed Assets and Capacity Usage For the company in the previous problem, suppose fixed assets are $720,000 and sales are projected to grow to $665,000. How much in new fixed assets are required to support this growth in sales?