The small appliance division of Ontario Products Company Lad, an electrical retail chain, had the following budgeted income statement for December 2008 Sales (8,000 units) Cost of goods sold Gross margin. Operating costs $730,000 432,000 288.000 Rent expense $30.000 Insurance expense 3,000 Amortization expense 15,000 Salaries expense 100,000 Bad debt expense 3,000 Interest expense on funds borrowed by the division... 1000 Total operating expenses. Net operating income 152.000 $136,000 "Disregand income taxes in this question Other information: 1. Actual and budgeted sales were (no change in selling price is expected) October 2008 November 2008 January 2009 February 2009. $562.500 $630,000 $450,000 $562,500 2. Company policy is to always maintain Merchandise Inventory equal to 5,000 units plus 25 percent of the following month's budgeted sales (units). 3. The company expects the following results from sales and collections of accounts receivable .5 percent of all sales are for cash. All credit sales are on terms of 2/10, n/30 50 percent of all credit sales are collected in the month of the sale, with 30 percent of these qualifying for the discount 40 percent of all credit sales are collected in the month after the sale (no discounts). 4.5 percent of all credit sales are collected two months after the sale The remainder of credit sales are uncollectible. 4. The following information is available regarding cash payments The insurance is an annual policy purchased on June 1, 2008 Interest is on a $160,000.5 percent note payable dated September 26, 2008, with principal and interest due in three months from that date. The company had a cash balance of $40,000 on December 1, 2008, and always maintains a minimum cash balance of at least $25,000 All purchases are paid for in the month they are made.