The Business Situation Armstrong Helmet Company manufactures a unique model of bicycle helmet. The company began operations December 1, 2013. Its accountant quit the second week of operations, and the company is searching for a replacement. The com- pany has decided to test the knowledge and ability of all candidates interviewing for the position. Each candidate will be provided with the information below and then asked to prepare a series of reports, schedules, budgets, and recommenda- tions based on that information. The information provided to each candidate is as follows. Cost Items and Account Balances Administrative salaries Advertising for helmets Cash, December 1 Depreciation on factory building Depreciation on office equipment Insurance on factory building Miscellaneous expenses-factory Office supplies expense Professional fees Property taxes on factory building Raw materials used $15,500 11,000 -0- 1,500 800 1,500 1,000 300 500 400 70,000 6,000 Rent on production equipment Research and development Sales commissions Utility costs-factory Wages-factory Work in process, December 1 Work in process, December 31 Raw materials inventory, December 1 Raw materials inventory, December 31 Raw material purchases Finished goods inventory, December 1 10,000 40,000 900 70,000 -0- -0- -0- 70,000 -0- Production and Sales Data 10,000 Number of helmets produced Expected sales in units for December ($40 unit sales price) Expected sales in units for January Desired ending inventory Direct materials per finished unit Direct materials cost 8,000 10,000 20% of next month's sales 1 kilogram $7 per kilogram 35 Direct labor hours per unit Direct labor hourly rate $20 Cash Flow Data Cash collections from customers: 75% in month of sale and 25% the following month. Cash payments to suppliers: 75% in month of purchase and 25% the following month. Income tax rate: 45%. Cost of proposed production equipment: $720,000. Manufacturing overhead and selling and administrative costs are paid as incurred. Desired ending cash balance: $30,000. 13. Determine the cash payback period on the proposed production equipment purchase, assuming a monthly cash flow as indicated in the cash budget (requirement 10f)