Question
Antioch Extraction, which mines ore in Montana, uses a calendar year for both financial-reporting and tax purposes. The following selected costs were incurred in December,
Antioch Extraction, which mines ore in Montana, uses a calendar year for both financial-reporting and tax purposes. The following selected costs were incurred in December, the low point of activity, when 1,150 tons of ore were extracted:
Straight-line depreciation$24,500
Charitable contributions*6,500
Mining labor/fringe benefits172,500
Royalties150,250
Trucking and hauling177,205
*Incurred only in December.
Peak activity of 2,450 tons occurred in June, resulting in mining labor/fringe benefit costs of $367,500, royalties of $286,750, and trucking and hauling outlays of $222,205. The trucking and hauling outlays exhibit the following behavior:
Less than 1,150 tons$154,705
From 1,150-1,649 tons177,205
From 1,650-2,149 tons199,705
From 2,150-2,649 tons222,205
Antioch uses the high-low method to analyze costs.
a)Calculate the total cost for next February when 1,450 tons are expected to be extracted.
3-b.If the company plans to extract 1,150 tons, at what number of tons can cost-effectiveness be achieved?
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