Smith & Chief Ltd. of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the four most recent quarters follow: SMITH & CHIEF LTD. Income Statements For the Four Quarters Ending December 31 Quarter 1 4,600 4,100 Quarter 2 Quarter 3 Quarter 4 4,800 Sales in units 5,120 Sales revenue A$460,000 A$410,000 A$512,000 A$480,000 Less: Cost of goods sold 276,000 246,000 307,200 184,000 164,000 204,808 192,000 288,000 Gross margin Less: Operating expenses: Advertising expense 21,100 21,100 21,188