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Ontario Pump Company, a small manufacturing company in Toronto, Ontario, manufactures three types of pumps used in a variety of applications. For many years the Company has been profitable and has operated at Capacity. However, in the last two years prices on all pumps were reduced and selling expenses increased to meet competition and keep the plant operating at capacity. Second-quarter results for the current year, which follow, typify recent experience. ONTARIO PUMP COMPANY Income Statement Second Quarter (in thousands) R-Pump F-Pump S-Pump Tota $8,000 $5,640 5180 $18,820 Sales Cost of goods sold 5,240 4,827 5,467 15,534 Gross margin $2,760 813 (287) 3,286 Selling and administrative 777 3786 1,850 1159 expenses Income before taxes Ontario Pump Company, a small manufacturing company in Toronto, Ontario, manufactures three types of pumps used in a variety of applications. For many years the Company has been profitable and has operated at Capacity. However, in the last two years prices on all pumps were reduced and selling expenses increased to meet competition and keep the plant operating at capacity. Second-quarter results for the current year, which follow, typify recent experience. ONTARIO PUMP COMPANY Income Statement Second Quarter (in thousands) R-Pump F-Pump S-Pump Tota $8,000 $5,640 5180 $18,820 Sales Cost of goods sold 5,240 4,827 5,467 15,534 Gross margin $2,760 813 (287) 3,286 Selling and administrative 777 3786 1,850 1159 expenses Income before taxes