The Following Amounts Were Taken from the Financial Statements of R.Dodd

question 59

Multiple Choice

The following amounts were taken from the financial statements of R.Dodd Company: $\begin{array}{lrr}&2021&2020\\\text { Current liabilities } & \$ 1,280,000 & \$ 1,220,000 \\\text { Long-term liabilities } & 1,800,000 & 1,600,000 \\\text { Interest expense } & 100,000 & 50,000 \\\text { Income tax expense } & 50,000 & 30,000 \\\text { Net income } & 300,000 & 170,000 \\\text { Net cash provided by operating activity } & 325,000 & 270,000\end{array}$ The times interest earned for 2021 is

• A)3.0 times.
• B)3.5 times.
• C)4.0 times.
• D)4.5 times.

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Definitions:

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.

Average Total Cost

The total cost of production divided by the number of units produced, which includes both fixed and variable costs.

Average Total Cost

The total cost divided by the number of goods or services produced, representing the per unit cost of production.