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. Page 112 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 $16,000,000 Sales Manufacturing expenses: Variable $7,200,000 2,340,000 Fixed overhead 9.540.000 6,460,000 $2,400,000 Gross margin Selling and administrative expenses: Commissions to agents Fixed marketing expenses Fixed administrative expenses Net operating income Fixed interest expenses Income before income taxes Income taxes (30%) Net income 120,000* 1,800,000 4,320,000 2,140,000 540,000 1,600,000 480,000 $ 1,120,000 Salaries: Sales manager $ 100,000 600,000 400,000 Salespersons Travel and entertainment Advertising Total 1.300.000 $2,400,000 Super, replied Karl. And I noticed that the $2,400,000 equals what we're paying the agents under the old 15% commission rate. It's even better than that, explained Barbara. We can actually save $75,000 a year because that's what we're paying our auditors to check out the agents' reports. So our overall administrative expenses would be less." Pull all of these numbers together and we'll show them to the executive committee tomorrow, said Karl. With the approval of the committee, we can move on the matter immediately. 3. Determine the dollar sales at which net income would be equal regardless of whether Pittman Company sells through agents (at a 20% commission rate) or employs its own sales force