The Net Income of a Company for the Year Just

question 30

Multiple Choice

The net income of a company for the year just ended is $230,000. Income tax is $80,500 and interest expense is $20,000. The number of times interest was earned would be

• A) 0.05.
• B) 10.5.
• C) 11.5.
• D) 16.5.

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Definitions:

Direct Materials

Raw materials that can be directly attributed to the production of goods, visually identifiable in the final product.

Direct Labor

The wages and associated costs of employees who are directly involved in the production of goods or services.

Manufacturing Overhead Applied

The allocation of manufacturing overhead costs to the units produced, based on a predetermined formula.

Manufacturing Overhead Rate

The ratio of manufacturing overhead costs to the base used for allocating these costs, typically used to assign overhead costs to products.