Listenup audio systems sells and installs car stereo

10. ListenUp Audio Systems sells and installs car stereo systems. Rosemary Patterson needs to
prepare a purchases budget for the last quarter of 2007. The company’s sales budget for the fourth
quarter is provided below:
October November December
Budgeted Sales $90,000 $102,000 $104,000
Rosemary expects the company’s cost of goods sold to be 80% of sales. The ending inventory
balance each month should be 20% of the next month’s cost of goods sold. Based on this
information, how much inventory does Rosemary need to purchase for November?
a. $78,400
b. $98,040
c. $80,640
d. $79,360
e. None of the above
11. During its first year of operations, Overton Company paid $20,000 for direct material and $50,000
for production workers’ wages. Lease payment and utilities on the production facility amounted to
$12,000. General, selling and administrative expenses amounted to $6,000. The company made
20,000 units and sold 16,000 units for $6.50 each. What was the amount of the company’s net
income for the first year? Acct 2301 3 Final Exam

12. Spacely Sprockets’ sales budget shows the following expected total sales:
Month Total Sales
January $30,000
February $40,000
March $35,000
April $30,000
The company expects 80% of its sales to be on account (credit sales). Credit sales are collected as
follows: 30% in the month of sale and 70% in the month following the sale. What is the budgeted
accounts receivable balance at the end of the first quarter?
13. Geerts Industries’ sales budget shows the following expected total sales for the third quarter of
2007:
Month Total Sales
July $50,000
August $52,000
September $60,500
The company expects 75% of its sales to be credit sales. Credit sales are expected to be collected
as follows: 20% in the month of sale, 75% in the month following the sale with the remainder
being uncollectible and written off in the month following the sale. What is the budgeted amount
of total cash collections for August?
14. The Raiderland Company produces a number of products, including a Texas Tech flag. The
company, which began operations at the beginning of the year, uses a standard cost system. The
standard costs for one Texas Tech flag are provided below:
Direct Material (0.5 yds @ $2.00 per yard) $1.00 / unit
Direct Labor (1 hr @ $8.50 per hour) $8.50 / unit
The company produced and sold 35,000 flags during 2006 at the following costs:
Direct Materials (18,000 yards) $ 17,280
Direct Labor (36,000 hours) $374,400
What is the company’s material usage variance for 2006?
a. $1,000 favorable
b. $1,000 unfavorable
c. $500 favorable
d. $500 unfavorable
e. None of the above
Acct 2301 4 Final Exam