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
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?
Group of answer choices
a. Variable costing income (VCI) exceeds full costing income (FCI) every year
b. VCI exceeds FCI in Yrs 1 and 2 only
c. VCI exceeds FCI in Yrs 2 and 3 only
d. VCI never exceeds FCI