Assume the following budgeted information for a merchandising company:

Budgeted sales (all on credit) for November, December, and January are $255,000, $225,000, and $216,000, respectively.

Cash collections related to credit sales are expected to be 75% in the month of sale, 25% in the month following the sale.

The cost of goods sold is 70% of sales.

Each months ending inventory equals 20% of next months cost of goods sold.

40% of each months merchandise purchases are paid in the current month and the remainder is paid in the following month.

Monthly selling and administrative expenses that are paid in cash in the month incurred total $28,500.

Monthly depreciation expense is $12,500.

The budgeted net operating income for December would be:

Multiple Choice

$39,000

$28,625

$41,125

$26,500