A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto:

McKenzie Sales, Ltd. Comparative Income Statement
	This Year			Last Year
Sales	$	7,340,000		$	5,578,400
Cost of goods sold		4,760,000			3,508,500
Gross margin		2,580,000			2,069,900
Selling and administrative expenses:
Selling expenses		1,395,000			1,074,000
Administrative expenses		703,500			615,000
Total expenses		2,098,500			1,689,000
Net operating income		481,500			380,900
Interest expense		100,000			86,000
Net income before taxes	$	381,500		$	294,900

Members of the companys board of directors are surprised to see that net income increased by only $86,600 when sales increased by $1,761,600.

Year 1 Year 2 Year 3 Year 4 Year 5 Sales % % % % % Current assets: Cash % % % % % Accounts receivable % % % % % Inventory % % % % % Total current assets % % % Current liabilities % % % % %