Question

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

Comparative income statements for South Drive Company for Year 2 and Year 1 are given below. Return on sales for South Drive is higher in Year 2 than in Year 1. What expense is causing this higher profitability?

Year 2

Year 1

Sales

900,000

500,000

Cost of Goods Sold

(332,000)

(240,000)

Gross Profit on Sales

568,000

260,000

Wage Expense

(54,000)

(30,000)

Rent Expense

(90,000)

(50,000)

Operating Income

424,000

180,000

Interest Expense

(54,000)

(30,000)

Net Income

370,000

150,000

Group of answer choices

Wage expense

Interest expense

Rent expense

Cost of goods sold

Business   Accounting   
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Homework Answers

Answer #1

Answer: Cost of goods sold

Being cost ofgoods sold Percentage increase is less than the remaining expenses. So cost of goods sold expenses is cuaing for higher profitability.

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