Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 14% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year. The statement follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses: Variable Fixed overhead Gross margin Selling and administrative expenses: Commissions to agents Fixed marketing expenses Fixed administrative expenses Net operating income Fixed interest expenses Income before income taxes Income taxes (20%) Net income *Primarily depreciation on storage facilities. $ 18,400,000 $ 7,600,000 2,660,000 10,260,000 8,140,000 2,576,000 200,000* 2,200,000 4,976,000 $ 3,164,000 620,000 2,544,000 508,800 2,035,200 An Derbare handed the statement to Vau \anni Dittimaanta nrooid.