Port Corp. is a real estate company, it started operations on April 1^st, 2020. The company manufactures and sales mobile modular homes for $100,000 each. The price is very competitive and Port wants to keep the price same for the next few years. Due to COVID there has been an exodus of people from urban communities to mobile homes outside Vancouver lower mainland.

For the first year of operations Port used independent sales agents to market the company's mobile modular homes. The company pays the agents a commission of 7% of sales. The income statement for the year ended March 31, 2021 are as follows:

PORT CORP.

Income Statement

For the year ended March 31, 2021

Sales $10,000,000 Cost of sales (variable) 6,500,000 Gross margin 3,500,000 Selling and administrative expenses: Commissions $700,000 All other expenses (fixed) 200.000 900.000 Operating income $2,600,000