7. The Johnston Company had the following costs based on the production and sale of 40,000 units: Other information: The company had the following actual sales for November and budgeted sales for December, January, and February: - The company has a policy of always maintaining the following inventory levels: - Finished Goods Inventory =1,000 units plus 10% of next month's sales. - Direct Materials Inventory =$2,000 plus 30% of next month's production requirements. - The company's sales and collection history shows that 10% of all sales are for cash and the accounts receivable are collected in the following way: 70% in the month of the sale 28% in the month after the sale - A cash balance of $10,000 is maintained at all times (any shortages are borrowed and any excess funds are used to retire debt) - Amortization expense is 70% of the fixed manufacturing overhead and 40% of the fixed selling and administrative costs (not included in the above fixed costs) I The company expects to purchase equipment for $800,000 in December with a $400,000 down payment and the balance to be paid in 90 days