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magine, Inc. is a company that re$-$sells one product, a particularly comfortable lawn chair.

An overseas contractor makes the product exclusively for Imagine, so Imagine has no

manufacturing$-$related costs.

$2.$ As of $11/19,$ each lawn chair costs Imagine $$4$ per unit. Imagine sells each chair for $$10$ per

unit.

$3.$ The estimated sales $($in units$)$ are as follows:

Year Month Sales $($in units$)$

$2019$ November $11,250$

$2019$ December $11,600$

$2020$ January $10,000$

$2020$ February $11,400$

$2020$ March $12,000$

$2020$ April $15,600$

$2020$ May $18,000$

$2020$ June $22,000$

$2020$ July $18,000$

$4.$ Per an existing contract, the cost of each chair is scheduled to increase by $5\%$ on March $1,$

$2020.$ In addition, because of increasing costs of plastic webbing, the cost is anticipated to

increase by an additional $5\%$ on May $1,2020.$ To offset these increases, the company plans

to raise the sales price to $$11\mathrm{.}25$ per unit beginning May $1,2020.$ The sales forecast $($i$.$e$.,$

estimated sales in units$)$ takes this price increase into account.

$5.$ Thirty percent of any month$$s sales are for cash, and the remaining $70\%$ are on credit.

Thirty percent of the credit sales are collected in the month of sale, $50\%$ are collected in the

following month, and $16\%$ are collected in the second month after the sale. The remaining

receivables are deemed uncollectible. Bad debts are written off in the month the debt is

deemed uncollectible $($e$.$g$.$ if the sale is made in January and is not collected by the end of

March, it is written off in March.$)$ No accrual for estimated bad debts is made in the month of

sale.

$6.$ The firm$$s policy regarding inventory is to stock $($i$.$e$.$ have in ending inventory$)40\%$ of the

forecasted demand in units $($i$.$e$.,$ estimated sales$)$ for the next month. Imagine uses the first$-$

in$,$ first$-$out $($FIFO$)$ method in accounting for inventories.

$7.$ Forty percent of the inventory purchases are paid for in the month of purchase and the

remaining $60\%$ are paid in the following month $($i$.$e$.$ all of the previous month$$s Accounts

Payable are paid off by the end of any month.$)$

$8.$ Per a prior contract, a cash payment of $$50,000$ for equipment previously purchased is due in

January. Another payment of $$30,000$ is due in February. Depreciation on the equipment

previously purchased is included in the overhead cost detailed below $($see item $9).$ Also,

dividends of $$12,000$ are to be paid in March.

$9.$ Monthly operating expenses consist of the following $($if these are cash expenses, they are

paid when incurred$)$: