Company R and Company S Each Have the Same Operating

question 87

Multiple Choice

Company R and Company S each have the same operating income (EBIT) and basic earning power (BEP) ratio. Company S, however, has a lower times-interest-earned (TIE) ratio. Which of the following statements is most correct?

• A) Company S has a higher ROA.
• B) Company S has a higher net income.
• C) Company S has a higher interest expense.
• D) Statements a and b are correct.
• E) Statements a, b, and c are correct.

---

Definitions:

Charge Per Copy

The amount billed for each photocopy or printed page, typically in the context of office equipment or copy services.

High-low Method

A technique used in cost accounting to estimate variable and fixed costs based on the highest and lowest levels of activity.

Machine Hours

A measure of the amount of time a machine is operated, used in accounting to allocate manufacturing overhead costs.

Cost Driver

A factor that causes a change in the cost of an activity, essentially determining the level of expense incurred in producing a product or service.