A comparative income statement is given below for McKenzie Sales, Limited, of Toronto: McKenzie Sales, Limited Comparative Income Statement Sales Cost of goods sold. Gross margin This Year! $ 7,350,000 4,690,000 2,660,000 Last Year $ 5,586,000 3,509,500 2,076,500 Selling and administrative expenses: Selling expenses Total expenses Net operating income 1,380,000 1,075,500 Administrative expenses 706,000 616,500 2,086,000 1,692,000 574,000 384,500 Interest expense Net income before taxes 102,000 90,000 $ 472,000 $294,500 Members of the company's board of directors are surprised to see that net income increased by only $177,500 when sales increased by $1,764,000.