The results of operations for the Garret Bug Spray Manufacturing Company for the fourth quarter of 2014 were as follows (in thousands): Note: Garret uses the variable costing method. Thus, only variable costs are included in the cost of goods sold. Fixed costs are charged to expense in the period incurred. The company's balance sheet as of the end of the fourth quarter of 2014 was as follows (in thousands): Additional information: Sales and variable costs of sales are expected to increase by 4 percent in the next quarter. All sales are on credit with 50 percent collected in the quarter of sale and 50 percent collected in the following quarter. Variable cost of sales consists of 40 percent materials, 40 percent direct labor, and 20 percent variable overhead. Materials are purchased on credit. 60 percent are paid for in the quarter of purchase, and the remaining amount is paid for in the quarter after purchase. There is no inventory. Also, direct labor and variable overhead costs are paid in the quarter the expenses are incurred. Fixed bug removal costs (other than $6,000 of depreciation expense) are expected to increase by 1 percent. Fixed bug removal costs requiring payment are paid in the quarter they are incurred. Fixed selling and administrative costs (other than $2,000 of depreciation expense) are expected to increase by 2 percent. Fixed selling and administrative costs requiring payment are paid in the quarter they are incurred. The tax rate is expected to be 40 percent. All taxes are paid in the quarter they are incurred. No purchases of fixtures or equipment are expected in the first quarter of 2015