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9 Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LOS-4, LOSS, LO5-6] 10 points 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. 035815 Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: Pittnan Company Budgeted Incoane Statenent Sales $23,000,000 facturing expenses Variable eBook 10.350,000 Fixed overhead 3,220,000 13,570,000 9, 430,000 Gross nargin Selling apd administrative expenses ,450,000 161,000 Print sions to agents Pixed marketing expenses Fixed administrative expenses Net operating income Fixed interest expenses Incone before incone taxes Incone taxes (30 Net income 2.080,0005,691,000 3,739,000 805,000 2,934,000 880,200 References $ 2,053,800 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 commission rate to 20%." That's the last straw, Karl replied angrily. "Those agents have been demanding more and more, and this time they've gone too far How can they possibly defend a 20% commission rate?" They claim that after paying for advertising, travel, and the other costs of promotion, there's nothing left over for profit," replied Barbara