
Times Interest earned: Times interest earned is calculated by dividing income before interest and income tax by interest expense. This ratio shows the ratio of income earned by a company to amount of interest expenses, whether the company is earning enough to pay off its interest expenses. Thus, higher the ratio more capable is the company to pay off its interest expense. Formula for the same is given below:
Requirement 1:
To determine:
Times interest earned ratio for miller Company using the formula as stated above.

Explanation of Solution
Times interest earned for Miller Company.
Requirement 2:
To determine:
Times interest earned ratio for Weaver Company using the formula as stated above.

Explanation of Solution
Times interest earned for Weaver Company
Requirement 3:
To determine:
Changes If sales Increase by 30%.

Explanation of Solution
Miller Company | Weaver Company | ||
Sales | 1000000 | Sales | 1000000 |
Add 30% | 300000 | Add 30% | 300000 |
Total Sales | 1300000 | Total Sales | 1300000 |
Sales | 1300000 | Sales | 1300000 |
Variable Expense(80%) | 1040000 | Variable Expense(60%) | 780000 |
Income Before Interest | 260000 | Income Before Interest | 520000 |
Interest(Fixed Expense) | 60000 | Interest(Fixed Expense) | 260000 |
Net Income | 200000 | Net Income | 260000 |
If sales are increased by 30%, Net income of Miller increases to $200000 from $140000 and Net Income of Weaver increases from $140000 to $260000.
Requirement 4:
To determine:
Changes If Sales increase by 50%

Explanation of Solution
Miller Company | Weaver Company | ||
Sales | 1000000 | Sales | 1000000 |
Add 50% | 500000 | Add 50% | 500000 |
Total Sales | 1500000 | Total Sales | 1500000 |
Sales | 1500000 | Sales | 1500000 |
Variable Expense(80%) | 1200000 | Variable Expense(60%) | 900000 |
Income Before Interest | 300000 | Income Before Interest | 600000 |
Interest(Fixed Expense) | 60000 | Interest(Fixed Expense) | 260000 |
Net Income | 240000 | Net Income | 340000 |
If sales are increased by 50% Net Income of Miller company increased to $240000 from $140000 and net income of Weaver increases to $340000 from $140000.
Requirement 5:
To determine:
Changes If Sales Increase by 80%

Explanation of Solution
Miller Company | Weaver Company | ||
Sales | 1000000 | Sales | 1000000 |
Add 80% | 800000 | Add 80% | 800000 |
Total Sales | 1800000 | Total Sales | 1800000 |
Sales | 1800000 | Sales | 1800000 |
Variable Expense(80%) | 1440000 | Variable Expense(60%) | 1080000 |
Income Before Interest | 360000 | Income Before Interest | 720000 |
Interest(Fixed Expense) | 60000 | Interest(Fixed Expense) | 260000 |
Net Income | 300000 | Net Income | 460000 |
If sales increase to 80% net income of Miller Company increases to $300000 from $140000 and Weaver Company increases from $140000 to $460000.
Requirement 6:
To determine:
Changes If sales decrease by 10%

Explanation of Solution
Miller Company | Weaver Company | ||
Sales | 1000000 | Sales | 1000000 |
Less 10% | 100000 | Less 10% | 100000 |
Total Sales | 900000 | Total Sales | 900000 |
Sales | 900000 | Sales | 900000 |
Variable Expense(80%) | 720000 | Variable Expense(60%) | 540000 |
Income Before Interest | 180000 | Income Before Interest | 360000 |
Interest(Fixed Expense) | 60000 | Interest(Fixed Expense) | 260000 |
Net Income | 120000 | Net Income | 100000 |
If Sales decrease by 10%, Net income of miller reduces to $120000 from $140000 and Weaver Company, reduces from $140000 to $100000.
Requirement 7:
To determine:
Changes If sales decrease by 20%

Explanation of Solution
Miller Company | Weaver Company | ||
Sales | 1000000 | Sales | 1000000 |
Less 20% | 200000 | Less 20% | 200000 |
Total Sales | 800000 | Total Sales | 800000 |
Sales | 800000 | Sales | 800000 |
Variable Expense(80%) | 640000 | Variable Expense(60%) | 480000 |
Income Before Interest | 160000 | Income Before Interest | 320000 |
Interest(Fixed Expense) | 60000 | Interest(Fixed Expense) | 260000 |
Net Income | 100000 | Net Income | 60000 |
If sales decrease by 20%, Net income of Miller company reduces from $140000 to $100000 and Weaver Company reduces from $140000 to $60000
Requirement 8:
To determine:
Changes If sales decrease by 40%

Explanation of Solution
Miller Company | Weaver Company | ||
Sales | 1000000 | Sales | 1000000 |
Less 40% | 400000 | Less 40% | 400000 |
Total Sales | 600000 | Total Sales | 600000 |
Sales | 600000 | Sales | 600000 |
Variable Expense(80%) | 480000 | Variable Expense(60%) | 360000 |
Income Before Interest | 120000 | Income Before Interest | 240000 |
Interest(Fixed Expense) | 60000 | Interest(Fixed Expense) | 260000 |
Net Income | 60000 | Net Income | -20000 |
If sales decrease by 40% net income of Miller Company reduces to $60000 from $140000 and Weaver Company suffers a loss of $20000 from profit of $140000.
Want to see more full solutions like this?
Chapter 11 Solutions
Fundamental Accounting Principles
- Carla Vista Company had $212,200 of net income in 2024 when the unit selling price was $151, the unit variable costs were $95, and the fixed costs were $571,800. Management expects per unit data and total fixed costs to remain the same in 2025. The president of Carla Vista Company is under pressure from stockholders to increase net income by $84,000 in 2025. Assume that Carla Vista Company sells the same number of units in 2025 as it did in 2024. What would the unit selling price have to be in order to reach the stockholders' desired net income, assuming the unit variable costs and fixed costs remain at 2024 levels? New unit selling price $arrow_forwardEric Greenhills, a partner in the CPA firm of XYZ & Co. LLP, audited the financial statements of ABC. Company. The audit report can be signed by Eric Greenhills XYZ & Co., LLP a Yes Yes b No No c Yes No d No Yes is the correct answer c yes ,no or a yes, yes ??arrow_forwardDonald Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base salary of $1,380 per month. One of the barbers serves as the manager and receives an extra $535 per month. In addition to the base salary, each barber also receives a commission of $3.75 per haircut. Other costs are as follows. Advertising $270 per month Rent $1,010 per month Barber supplies $0.50 per haircut Utilities $160 per month plus $0.15 per haircut Magazines $35 per month Donald currently charges $11.00 per haircut. Determine the unit variable costs per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 2.25.) Total unit variable cost per haircut $ Total fixed costs $arrow_forward
- Solve this problem urgarrow_forwardCarla Vista Company had $212,200 of net income in 2024 when the unit selling price was $151, the unit variable costs were $95, and the fixed costs were $571,800. Management expects per unit data and total fixed costs to remain the same in 2025. The president of Carla Vista Company is under pressure from stockholders to increase net income by $84,000 in 2025. Compute the number of units that would have to be sold in 2025 to reach the stockholders' desired net income. Units needed in 2025 unitsarrow_forwardSolve this Accounting problemarrow_forward
- Question 5.5arrow_forwardCarla Vista Company had $212,200 of net income in 2024 when the unit selling price was $151, the unit variable costs were $95, and the fixed costs were $571,800. Management expects per unit data and total fixed costs to remain the same in 2025. The president of Carla Vista Company is under pressure from stockholders to increase net income by $84,000 in 2025. (a) Compute the number of units sold in 2024. Sales in 2024 unitsarrow_forwardThe sales level in units requiredarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





