Universal Electric Company is a small, rapidly growing wholesaler of consumer electrical products. The firm's main product lines are small kitchen appliances and power tools. Marcia Wilcox, Universal's general manager of marketing, has recently completed a sales forecast. She believes that the company's sales during the first quarter of next year will increase by 10 per cent each month over the previous month's sales. Wilcox then expects sales to remain constant for several months. Universal's projected balance sheet as at 31 December this year is as follows: $ 35 000 Cash Accounts receivable 270 000 Marketable securities 15 000 154 000 Inventory Buildings and equipment (net of acc. depr.) Total assets 626 000 $1 100 000 Accounts payable Long-term loan interest payable Property taxes payable Long-term loan payable (10% p.a.) Share capital Retained earnings Total liabilities and shareholders' equity $176 400 12 500 3 600 300 000 500 000 107 500 $1 100 000 Jack Hanson, the assistant accountant, is now preparing a monthly budget for the first quarter of next year. In the process, the following information has been accumulated: Projected sales for December this year are $400 000. Credit sales typically are 75 per cent of total sales. Universal's credit experience indicates that 10 per cent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. Universal's cost of goods sold generally runs at 70 per cent of sales. Inventory is purchased on credit, and 40 per cent of each month's purchases is paid during the month of purchase. The remainder is paid during the following month. In order to have adequate inventory on hand, the firm aims to have inventory at the end of each month equal to half of the next month's projected cost of goods sold. Hanson has estimated that Universal's other monthly expenses will be as follows: $18 000 Sales salaries Advertising and promotion Administrative salaries 19 000 21 000 Depreciation Interest on long-term loan Property taxes 25 000 2 500 900 In addition, sales commissions run at the rate of 1 per cent of sales.