Information from a Manufacturing Company's Current Year Income Statement Follows

question 170

Short Answer

Information from a manufacturing company's current year income statement follows for the current year:
$\begin{array}{|l|r|}\hline \text { Sales } & \$ 800,000 \\\hline \text { Cost of goods sold } & 455,000 \\\hline \text { Gross profit } & \$ 345,000 \\\hline \text { Operating expenses } & 265,000 \\\hline \text { Operating income } & \$ 80,000 \\\hline \text { Interest expense } & \underline{32,000} \\\hline \text { Income before taxes } & \$ 48,000 \\\hline \text { Income taxes expense } & \underline{12,400} \\\hline \text { Net income } & \underline{35,600} \\\hline\end{array}$
Calculate the company's times interest earned.

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Definitions:

Raw Materials Used

The total quantity of raw components consumed in the production process to manufacture goods.

Raw Materials Inventory

The total cost of all the components lying in a manufacturing or production facility that have not yet been used or processed.

Underapplied Overhead

Occurs when the allocated manufacturing overhead cost is less than the actual overhead incurred, leading to under-recovered expenses.

Manufacturing Overhead

This includes all the indirect costs associated with manufacturing a product, such as utilities, indirect labor, and maintenance of equipment.