Comparative income statements for King Engineering Company for 2012 and 2011 are given below.

1. Prepare common-size income statements for King Engineering Company for 2012 and 2011.
2. Return on sales for King Engineering is lower in 2012 than in 2011. What expense or expenses are causing this lowerprofitability?

2012 2011 Sales Cost of goods sold. Gross profit on sales Selling and general expenses Operating income. Interest expense. Income before income tax. Income tax expense Net income $ 885,000 (570,000) $ 315,000 (305,000) $ 240,000 (106,000) $ 209,000 (35,000) $ 174,000 (20,000) $136,000 $ 95,000 $ 122,000