Chamiching Makes Hacksaw Blades In the First Year, Variable Costs Accounted for Half of First

Multiple Choice

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. $$\begin{array} { | c | c | c | } \hline \text { Hacksaw blades } & \text { Sold } & \text { Produced } \\\hline Y r 1 & 18,000 & 22,000 \\\hline Y r 2~ & 25,000 & 23,000 \\\hline Y r ~ 3 & 37,000 & 35,000 \\\hline\end{array}$$ $$\begin{array} { | c | c | c | } \hline & \text { Sales price } & \text { Full cost } \\\hline \operatorname { Yr } 1 & \$ 10.00 & \$ 6.00 \\\hline \operatorname { Yr } 2 & \$ 11.00 & \$ 6.60 \\\hline \operatorname { Yr } 3 & \$ 12.00 & \$ 7.60 \\\hline\end{array}$$ 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. For Chamiching, which of the following is true?

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