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 20% 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 17,500,000 Sales Manufacturing expenses: 7,450,000 Variable Fixed overhead 2,540,000 9,990,000 7,510,000 Gross margin Selling and administrative expenses: Commissions to agents 3,500,000 170,000. Fixed marketing expenses Fixed administrative expenses 2,050,000 5,720,000 1,790,000 Net operating income 590,000 Fixed interest expenses Income before income taxes 1,200,000 Income taxes (30%) 360,000 Net income 840,000