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Frankel Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The company's revenues and expenses (in British pounds: ) for the last three months are given below: Frankel Ltd Comparative Income Statements For the Three Months Ended June 30 May June 3,800 Sales in units 4,715 5,630 Sales revenue 855,000 1,060,875 1,266,750 565,800 Cost of goods sold 456,000 675,600 Gross margin 399,000 495,075 591,150 Selling and administrative expenses: 98,125 84,400 111,850 Shipping expense 86,500 86,500 86,500 Advertising expense Salaries and commissions 180,800 212,825 244,850 9,050 Insurance expense 9,050 9,050 Depreciation expense 49,600 49,600 49,600 Total selling and administrative 410,350 456,100 501,850 expenses Operating income (loss) (11,350) 38,975 89,300 (Note: Frankel Ltd.'s income statement has been recast in the functional format common in North America.)