Pittman Company is a small but growing manutacturer o 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 18% 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 Sales Manufacturing expenses S 19,600,000 $ 7,800,000 Fixed overhead 2,820,000 10,620,000 Gross margin Selling and administrative expenses: 8,980,000 3,528,000 240,000 Commissions to agents Fixed marketing expenses Fixed administrative expenses 2,400,000 6.168,000 Net operating income Fixed interest expenses S 2,812,000 660,000 Income before income taxes Income taxes (40%) 2.152,000 860,800 Net income 1,291,200 Primarily depreciation on storage facilities