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 15% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: Sales Pittman Company Budgeted Income statement For the Year Ended December 31 Manufacturing expenses: $ 23,500,000 $ 10,575,000 3,290,000 Variable Fixed overhead Cross margin Selling and administrative expenses: Commissions to agents Fixed marketing expenses 13,865,000 9,635,000 3,525,000 Fixed administrative expenses. 164,500 2,100,000 5,789,500 Not operating income Fixed interest expenses Income before income taxes Income taxes (30%)) 3,845,500 022,500 3,023,000 905,900 $ 2,116,100 Net incoma *Primarily depreciation on storage facilities. As Barbara handed the statement to Karl Vecci, Pittman's president, she commented, "I went ahead and used the agents' 15% commission rate in completing these statements, but we've just learned that they refuse to handle our products next year unless we Increase the cornmission race to 20%." Prev 1 of 2 Next >