The common-size income statement data below are for Julian Company and Standard Company. Standard Company is the best company in Julians industry; all companies in the industry strive to do things the way that Standard does them.

Julian % of Sales ||| Standard % of Sales

Sales 20,000 100.0% ||| 130,000 100.0%

Cost of Goods Sold (6,000) -30.0% ||| (39,000) -30.0%

Wage Expense (10,000) -50.0% ||| (65,000) -50.0%

Research Expense (2,000) -10.0% ||| (13,000) -10.0%

Advertising Expense (1,600) -8.0% ||| (6,000) -4.6%

Net Income 400 2.0% ||| 7,000 5.4%

Which ONE of the following statements is TRUE regarding Julians income statement? Remember, Standard Company represents the standard of performance in Julians industry.

• Julian Company has a problem with its advertising expense.
• Julian Company has a problem with its wage expense.
• Julian Company has a problem with its research expense.
• Julian Company has a problem with its cost of goods sold.
• Julian Companys profitability is better than Standard Companys profitability.