Question

Your manufacturing plant is operating at full capacity. In order to meet growth forecasts, you need to expand. A new addition to your building will increase capacity 50% at a cost of $450,000. If sales last year at full capacity were $2,000,000 and next year you plan to use 25% of the new addition, how much could you estimate next year's sales to be

Answer 1

$2,250,000

Step-by-step explanation:

The computation of the estimated next year sales is shown below:

= Sales last year at full capacity + Sales last year at full capacity × next year percentage × capacity percentage

= $2,000,000 + $2,000,000 × 50% × 25%

= $2,000,000 + $250,000

= $2,250,000

We simply applied the above formula so the correct estimated sales for the next year could come