Common-Size Income Statement Operations for Janelle Company for 2008 and 2009 are summarized below.

Required:
1. Prepare common-size income statements for 2009 and 2008.
2. What caused Janelle’s profitability to decline so dramatically in 2009?

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Net sales. Cost of goods sold Gross profit on sales Selling and general expenses Operating income 2009 2008 $600,000 $560,000 430,000 300,000 $170,000 $260,000 130,000 150,000 Interest expense Income (loss) before income tax Income tax (refund) 3,000 Net income (loss) $ (7,000) $ 40,000 50,000 $ (10,000) $110,000 45,000 $ 65,000 20,000 $ 45,000