nel 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 $ 29, 000 Cost of goods sold Variable $ 13, 050 Fixed 3, 480 16,530 Gross profit $ 12, 470 Selling and administrative costs Commissions $ 5,220 Fixed advertising cost 870 Fixed administrative cost 2,320 8 , 410 Operating income $ 4, 060 Fixed interest cost 725 Income before income taxes $ 3,335 Income taxes (30%) 1, 001 Net income $ 2,335