The discussion of EFN in the chapter implicitly assumed that the company was operating at full capacity. Often, this is not the case. Assume that Rosengarten was operating at 90 percent capacity. Full-capacity sales would be $1,000/.90 $1,111. The balance sheet shows $1,800 in fixed assets. The capital intensity ratio for the company is: Capital intensity ratio = Fixed assets/Full-capacity sales = $1,800/$1,111=1.62 This means that Rosengarten needs $1.62 in fixed assets for every dollar in sales when it eaches full capacity. At the projected sales level of $1,250, it needs $1,250 1.62 = $2,025 in fixed assets, which is $225 lower than our projection of $2,250 in fixed assets. 50, EFN is $565-225-$340. Blue Sky Mfg., Inc., is currently operating at 90 percent of fixed asset capacity. Current ales are $805,500 and sales are projected to grow to $940,000. The current fixed assets are $775,000. in now fixed on quire to support this growth in sales? (Do not round

The discussion of EFN in the chapter implicitly assumed that the company was operating at full capacity. Often, this is not the case. Assume that Rosengarten was operating at 90 percent capacity. Full-capacity sales would be $1,000/.90 $1,111. The balance sheet shows $1,800 in fixed assets. The capital intensity ratio for the company is: Capital intensity ratio = Fixed assets/Full-capacity sales = $1,800/$1,111=1.62 This means that Rosengarten needs $1.62 in fixed assets for every dollar in sales when it eaches full capacity. At the projected sales level of $1,250, it needs $1,250 1.62 = $2,025 in fixed assets, which is $225 lower than our projection of $2,250 in fixed assets. 50, EFN is $565-225-$340. Blue Sky Mfg., Inc., is currently operating at 90 percent of fixed asset capacity. Current ales are $805,500 and sales are projected to grow to $940,000. The current fixed assets are $775,000. in now fixed on quire to support this growth in sales? (Do not round

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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