Shown here are condensed income statements for two different companies

Required
1. Compute times interest earned for Virgo Company.
2. Compute times interest earned for Zodiac 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%?
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:

Virgo Company Zodiac Company Sales.. Variable expenses (50%) . . Income before interest .m $120,000 90,000 30,000 Interest expense (fixed) 45,000 nterest expense (fixed) ...15,000 5 15000 60,000 Income before interest.. $ 15000 Net income