Common-Size Income Statement

Comparative income statements for South Drive Company for Year 2 and Year 1 are given below:

	Year 2	Year 1
Sales	$900,000	$500,000
Cost of goods sold	(432,000)	(240,000)
Gross point on sales	$468,000	$260,000
Wage expense	(54,000)	(30,000)
Rent expense	(90,000)	(50,000)
Operating Income	(324,000)	(180,000)
Interest expense	(80,000)	(30,000)
Net Income	$244,000	$150,000

Prepare a common-size income statement for year 1 and year 2.

Return on sales for South Drive is lower in Year 2 than in Year 1. What expense is causing this lower profitability?