Naples Alitalia started its operations in January of the current year. Naples purchases frozen pizza doughs and resells this product to large supermarket chains. The following is a summary of the first four months of operation for Naples Alitalia:. January February Purchases $ 40,000$ Sales 62,000 32,000 49,000 March April 44,000 65,000 24,000 42,000 Naples anticipates opening a few additional sales territories in May and expects an increased volume of business as a result. Management has estimated that May sales will be $72,000 and that in order to meet this demand, management estimated that required purchases of the frozen pizza dough in May will be $42,000. The company believes it will be able to maintain its gross profit margin of 40 percent. All of Naples' sales are on credit. Due to strict credit policies, the company has no bad debt expense. The following collection performance is anticipated for the remainder of the year. Percent collected in month of sale Percent collected in month following sale Percent collected in the second month following sale 30 % 60 10 Naples pays for 80 percent of its purchases in the month that the purchases are made. The remaining amount is paid in the following month. The company's fixed selling and administrative expenses average $12,000 per month. Of this amount, $4,000 is depreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling and administrative expenses in the month that they are incurred. Naples' debt service is $5,000 per month. Of this amount, approximately $4,500 represents interest expense, and $500 is payment on the principal. The company's tax rate is approximately 35 percent. Quarterly tax payments are made at the end of March, June, September, and December