Question No.1) Caltec, Inc.,produces and sells recordable CD and DVD packs. Revenue and cost information relating to the products follow:

Product CD DVD

Selling price per pack. . . . . . . . . . . . . . . $8.00 $25.00 Variable expenses per pack. . . . . . . . $3.20 $17.50 Traceable fi xed expenses per year . . $138,000 $45,000

Common fixed expenses in the company total $105,000 annually. Last year the company produced and sold 37,500 CD packs and 18,000 DVD packs.

Required:Prepare contribution format income statement for the year segmented by product lines.

Question No 2) Ferguson Products Inc.,a manufacturer, reported $130 million in sales and a loss of $25 million in its absorption costing income statement provided to shareholders. According to a CVP analysis prepared for management, the company's break-even point is $120 million in sales.

Required: Assuming that the CVP analysis is correct, is it likely that the company's inventory level increased, decreased, or remained unchanged during the year? Explain.

Question No 3) Amcor, Inc.,incurs the following costs to produce and sell a single product.

Variable costs per unit:

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5

Variable manufacturing overhead. . . . . . . . . . . . . . . . $2

Variable selling and administrative expenses. . . . . . . $4

Fixed costs per year: Fixed manufacturing overhead. . . . . . . . . . . . . . . . . . $90,000

Fixed selling and administrative expenses. . . . . . . . . $300,000

During the last year, 30,000 units were produced and 25,000 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $85,000 for the 5,000 unsold units.

Required:

1. Is the company using absorption costing or variable costing to cost units in the Finished Goods inventory account? Show computations to support your answer.

2. Assume that the company wishes to prepare financial statements for the year to issue to its stockholders.

a.Is the $85,000 figure for Finished Goods inventory the correct amount to use on these statements for external reporting purposes? Explain.

b.At what dollar amountshouldthe 5,000 units be carried in inventory for external reporting purposes?