A comparative income statement follows for McKenzie Sales Ltd., of Toronto: Sales MCKENZIE SALES LTD. Comparative Income Statement For the Years Ended June 30, Year 1 and Year 21 Less: Cost of goods sold Gross margin Less: Operating expenses: Selling expenses Administrative expenses Total expenses Net operating income a Less: Interest expense Net income before taxes Year 2 $ 8,000,000 4,984,000 3,016,000 Year 1 $ 6,000,000 3,516,000 2,484,000 1,480,000 1,092,000 712,000 618,000 7,192,000 824,000 96,000 774,000 84,000 $ 725,000 $ 690,000 1,710,000 Members of the company's board of directors are surprised to see that net income increased by only $38,000 when sales increased by $2,000,000.