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

                       Ellis Company
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $240,000
Variable expenses (50%) . . . . . . . . . 120,000
Income before interest . . . . . . . . . . 120,000
Interest expense (fixed) . . . . . . . . . . 90,000
Net income . . . . . . . . . . . . . . . . . . . $ 30,000

                    Seidel Company
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $240,000
Variable expenses (75%) . . . . . . . . . 180,000
Income before interest . . . . . . . . . . . 60,000
Interest expense (fixed) . . . . . . . . . . 30,000
Net income . . . . . . . . . . . . . . . . . . . $ 30,000

Required:
1. Compute times interest earned for Ellis Company.
2. Compute times interest earned for Seidel Company.
3. What happens to each company’s net income if sales increase by 10%?
4. What happens to each company’s net income if sales increase by 40%?
5. What happens to each company’s net income if sales increase by 90%?
6. What happens to each company’s net income if sales decrease by 20%?
7. What happens to each company’s net income if sales decrease by 50%?
8. What happens to each company’s net income if sales decrease by 80%?

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 and 2.