Shown here are condensed income statements for two different companies (both are organized as LLCs and pay no income taxes).

Required
1. Compute times interest earned for Miller Company.
2. Compute times interest earned for Weaver Company.
3. What happens to each company’s net income if sales increase by 30%?
4. What happens to each company’s net income if sales increase by 50%?
5. What happens to each company’s net income if sales increase by 80%?
6. What happens to each company’s net income if sales decrease by 10%?
7. What happens to each company’s net income if sales decrease by 20%?
8. What happens to each company’s net income if sales decrease by 40%?
Analysis Component
9. Comment on the results from parts 3 through 8 in relation to the fixed- cost strategies of the two companies and the ratio values you computed in parts 1 and2.

Transcribed Image Text:

Miller Company Weaver Company Variable expenses (80%) . . . . . . . . 800,000 Variable expenses (60%) . . . . . . . . Income before interest .........200,000 Income before interest .. Interest expense (fixed) 60,000 nterest expense (fixed)..260000 Net income . . . . . ..140,000 Net income ...$ 140.000 600,000 400,000