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 ($000 omitted) Sales $ 30, 500 Cost of goods sold Variable $ 13, 725 Fixed 3, 660 17, 385 Gross profit $ 13 , 115 Selling and administrative costs Commissions $ 5,490 Fixed advertising cost 915 Fixed administrative cost 2,440 8, 845 Operating income 4,270 Fixed interest cost 763 Income before income taxes $ 3,507 Income taxes (30%) 1, 052 Net income $ 2,455