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Bling Diamonds Extraction, which mines for diamonds in Russia, uses a calendar year for both financial-reporting and tax purposes. The following selected costs were incurred
Bling Diamonds Extraction, which mines for diamonds in Russia, 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 | |||||||
1,400 tons of ore were extracted: | |||||||
Straight-line depreciation | 30,000 | Royalties | 160,000 | ||||
Mining labor/fringe benefits | 420,000 | Trucking and hauling | 225,000 | ||||
Peak activity of 3,000 tons occurred in June, resulting in mining labor/fringe benefit costs of $900,000, | |||||||
royalties of $230,400, and trucking and hauling outlays of $275,000. The trucking and hauling outlays | |||||||
exhibit the following behavior: | |||||||
Less than 1,499 tons | 225,000 | ||||||
From 1,500-2,999 tons | 250,000 | ||||||
From 3,000-4,499 tons | 275,000 | ||||||
From 4,500-5,999 tons | 300,000 | ||||||
Bling uses the high-low method to analyze costs. | |||||||
Required: | |||||||
1. | Classify which costs listed in terms of their behavior are the following: semi-variable and step-fixed. | ||||||
Show calculations to support your answers for mining labor/fringe benefits and royalties. | |||||||
2. | Calculate the total cost for next February when 1,700 tons are expected to be extracted. | ||||||
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