QUESTION 11

1. Chamiching makes hacksaw blades. Inventory values are determined using the first in, first out (FIFO) method. Production and sales data for the first three years appear below.

   Hacksaw blades	Sold	Produced
   Yr 1	18,000	22,000
   Yr 2	25,000	23,000
   Yr 3	37,000	35,000

   	Sales price	Full cost
   Yr 1	$10.00	$6.00
   Yr 2	$11.00	$6.60
   Yr 3	$12.00	$7.60

   For Chamiching, which of the following is true? In the first year, variable costs accounted for half of the full costs. Total fixed production costs increased each subsequent year by 20%, as a result of step-fixed costs and a general inflationary price increase.

   		The variable cost of Yr 2 ending inventory is $6,887
   		The full cost of Yr 2 ending inventory is double the variable cost ending inventory
   		There are 3,000 hacksaw blades in ending inventory
   		The fixed cost per unit in Yr 3 is $2.72
   		None of the above