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

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

Required

1. Compute times interest earned for Ace Company.

2. Compute times interest earned for Deuce Company.

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%?

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