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Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely
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: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expensest Variable Fixed overhead Gross margin Selling and administrative expensess Commissions to agents Fixed marketing expenses Fixed administrative expenses Net operating income Fixed interest expenses Incone before income taxes Income taxes (30%) Net Income "Primarily depreciation on storage facilities. $ 23,500,000 $ 10,575,000 3,290,000 3,525,000 164,500. 2,100,000 13,865,000 9,635,000 5,789,500 3,845,500 822,500 3,023,000 906,900 $ 2,116,100
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