Dawson Metals Is Currently Operating at 94% of Its Capacity

question 15

Multiple Choice

Dawson Metals is currently operating at 94% of its capacity and has sales of $3.1 million and fixed assets of $2.5 million.How much should the firm budget for fixed asset purchases if sales are projected to increase by 9% next year?

• A) $0
• B) $61,500
• C) $43,616
• D) $98,407

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Definitions:

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance, remaining constant no matter the level of output.

Equipment Purchase

The act of acquiring capital equipment for business use, often involving a significant investment.

Variable Cost

Costs that vary directly with the level of production or volume of sales.

Fixed Costs

Expenses that do not change with the level of production or sales in the short term, such as rent, salaries, and insurance.