5

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales, that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019: Lionel Corporation Budgeted Income Statement For the Year Ending June 30, 2019 ($800 omitted) S 28,500 Sales Cost of goods sold Variable Fixed S 12,825 3,500 Gross profit Selling and administrative costs 16,325 $ 12,175 Commissions Fixed advertising cost Fixed administrative cost S. 5,130 800 2,150 Operating income Income before income taxes Net income 8,080 S 4,095 705 S 3,390 1,017 s 2,373 Fixed interest cost Income taxes (30%)