Problem 11-5A Computing and analyzing times interest earned LO A1

[The following information applies to the questions displayed below.] Shown here are condensed income statements for two different companies (assume no income taxes).

Miller Company
Sales	$	1,200,000
Variable expenses (80%)		960,000
Income before interest		240,000
Interest expense (fixed)		66,000
Net income	$	174,000

Weaver Company
Sales	$	1,200,000
Variable expenses (60%)		720,000
Income before interest		480,000
Interest expense (fixed)		306,000
Net income	$	174,000

1. Compute times interest earned for Miller Company and for Weaver Company.. 2. What happens to each company's net income if sales increase by 30%. (Round your answers to nearest whole percent.)

3. What happens to each company's net income if sales increase by 40%? (Round your answers to nearest whole percent.)

4. What happens to each company's net income if sales decrease by 10%? (Round your answers to nearest whole percent.)

5. What happens to each company's net income if sales decrease by 30%? (Round your answers to nearest whole percent.)

6. Which company would have a greater ability to pay interest expense if sales were to decrease?