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 Ace Co.
2. Compute times interest earned for Deuce Co.
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 and 2.

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Ace Co. Deuce Co. Sales. $500,000 Sales Variable expenses (80%) 400,000 Income before interest 100,000 Variable expenses (60%) Income before interest $500,000 300,000 200,000 Interest expense (fixed) 30,000 Interest expense (fixed) 130,000 Net income $ 70,000 Net income $ 70,000