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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%

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:

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Lionel Corporation Budgeted Income Statement For the Year Ending June 30, 2019 ($000 omitted) Sales $ 30 , 300 Cost of goods sold Variable $ 13 , 635 Fixed 3, 636 17 , 271 Gross profit $ 13, 029 Selling and administrative costs Commissions $ 5, 454 Fixed advertising cost 909 Fixed administrative cost 2, 424 8, 787 Operating income $ 4, 242 Fixed interest cost 758 Income before income taxes $ 3,484 Income taxes (30%) 1 , 045 Net income 2, 439

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