Santa Fe Music, Inc. sells electronic keyboards. The following information regarding operating

costs has been extracted from budgets of Santa Fe Music for December of this year and the first

few months of next year:

Dec. Jan. Feb. Mar.

Payroll $12,000 $13,000 $22,000 $16,000

Insurance 4,000 4,000 4,000 4,000

Rent 6,000 6,000 6,000 6,000

Depreciation 2,000 2,000 2,000 2,000

Taxes 1,200 1,400 2,300 2,000

In addition to the above operating costs, enough keyboards are purchased each month to maintain

the inventory at 40 percent of the projected next month's sales. The firm is expected to be in

compliance with this policy on December 1. Budgeted sales are:

Dec. Jan. Feb. Mar. Apr.

Budgeted

sales in units: 40 45 60 50 40

4. Refer to Santa Fe Music, Inc. The average cost of a keyboard is $500.

Merchandise is paid for in the month following its purchase. All other expenses are paid in the

month in which they are incurred. On average, a keyboard sells for $1,500. Of each sale, 40

percent of the sales price is collected in the month of sale. The balance is collected in the month