Variable costs and fixed costs. (5-20 minutes) Lutukka, Oy, owns the rights to extract minerals from beach sands in Enare Lappmark. Lutukka has costs in three areas:  l01

a. Payment to a mining subcontractor who charges EUR 80 per ton of beach sand mined and returned to the beach (after being processed on the mainland to extract three minerals: ilmenite, rutile and zircon).

b. Payment of a government mining and environmental tax of EUR 50 per ton of beach sand mined.

c. Payment toa barge operator. This operator charges EUR 150,000 per month to transport each batch of beach sand—up to 100 tons per batch per day—to the mainland and then return to Fraser Island (that is, 0-100 tons per day = EUR 150,000 per month; 101-200 tons =

EUR 300,000 per month, and so on). Each barge operates 25 days per month. The EUR 150,000 monthly charge must be paid even if less than 100 tons are transported on any day and even if Lutukka requires fewer than 25 days of barge transportation in that month.

Lutukka is currently mining 180 tons of beach minerals per day for 25 days per month.  l01 REQUIRED 1. What is the variable cost per ton of beach sand mined? What is the fixed cost to Lutukka per month?
2. Plot one graph of the variable costs and another graph of the fixed costs of Lutukka. Your plots should be similar to Exhibits 2-4 and 2-5. Is the concept of relevant range applicable to your plots?

3. What is the unit cost per ton of beach sand mined

(a) if 180 tons are mined each day, or

(b) if 220 tons are mined each day? Explain the difference in the unit-cost figures.