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: Variable Fixed overhead Gross margin Selling and administrative expenses: Commissions to agents Fixed marketing expenses $ 24,500,000 $ 11,025,000 3,430,000 3,675,000 14,455,000 10,045,000 D 171,500* Fixed administrative expenses 2,140,000 5,986,500 Net operating income Fixed interest expenses Income before income taxes Income taxes (30%) Net income *Primarily depreciation on storage facilities. 4,058,500 857,500 3,201,000 960,300 $ 2,240,700