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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 1,500 tons of ore were extracted: Straight- line depreciation $ 35, 000 Charitable contributions* 10, 900 Mining labor/fringe benefits 277,500 Royalties 145, 900 Trucking and hauling 279,915 *Incurred only in December. Peak activity of 2,800 tons occurred in June, resulting in mining labor/fringe benefit costs of $518,000, royalties of $236,000, and trucking and hauling outlays of $364,915. The trucking and hauling outlays exhibit the following behavior: Less than 1, 500 tons $237 , 415 From 1, 500-1, 999 tons 279, 915 From 2, 000-2, 499 tons 322, 415 From 2, 500-2,999 tons 364, 915 Antioch uses the high-low method to analyze costs.Required: 1. Classify the five costs listed in terms of their behavior: variable, step-variable, committed fixed, discretionary fixed, step-fixed, or semivariable. 2. Calculate the total cost for next February when 1,800 tons are expected to be extracted. 3-a. Is hauling 1,500 tons with respect to Antioch's trucking/hauling cost behavior cost-effective? 3-b. If the company plans to extract 1,500 tons, at what number of tons can cost-effectiveness be achieved? 4. Distinguish between committed and discretionary fixed costs. If Antioch were to experience severe economic difficulties, which of the two types of fixed costs should management try to cut? 5. Speculate as to why the company's charitable contribution cost arises only in December
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