Question

When forecasting fixed asset​ requirements, the projected fixed asset balance will
A. always increase proportionally with sales.
B. not increase proportionally if excess capacity exists.
C. not increase proportionally with sales if the existing level of fixed assets is sufficient to support current sales.
D. remain the same since the balance is fixed.

Answer 1

Answer:

C. not increase proportionally with sales if the existing level of fixed assets is sufficient to support current sales.

Explanation:

The total assets comprises of current assets, fixed assets and the intangible assets .

The current assets includes cash, stock, account receivable, etc

Fixed assets include plant & machinery, land, equipment, furniture & fittings, etc.

And, the intangible assets include patents, copyrights, goodwill, etc.  

If the existing level of the fixed asset is enough to support the current assets so the projected fixed assets balance would not be increased proportionally with the increase in sales