Garnet Company Reported the Following on Its Income Statement ?
an Analysis of the Income Statement Revealed That Interest

question 80

Multiple Choice

Garnet Company reported the following on its income statement: ? $\begin{array}{lr}\text { Income before income taxes } & \$ 450,000 \\\text { Income tax expense } & 52,000 \\\text { Net income }&\$398,000\end{array}$ ?
An analysis of the income statement revealed that interest expense was $50,000.Garnet Company's times interest earned are earned was:

• A) 7.8 times.
• B) 11 times.
• C) 10 times.
• D) 8.1 times.

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Definitions:

Direct Materials Quantity Variance

A measure used to evaluate the efficiency of the quantity of materials used in production, calculated as the difference between the standard cost of direct materials and the actual cost of direct materials used.

Actual Costs

The real expenditure incurred in the manufacturing or production of goods and services, as opposed to estimated costs.

Standard Costs

Predetermined or estimated costs of manufacturing, selling, or performing a service, used as benchmarks against actual costs for budgetary control and performance measurement.

Price Variances

Differences between the actual prices paid for goods or services and the expected or standard prices.