Lone Mountain Extraction, which mines ore in Idaho, 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 1,800 tons of ore were extracted:

Straight-line depreciation	$	44,000
Charitable contributions*		13,000
Mining labor/fringe benefits		387,000
Royalties		121,000
Trucking and hauling		380,385

*Incurred only in December.

Peak activity of 3,100 tons occurred in June, resulting in mining labor/fringe benefit costs of $666,500, royalties of $173,000, and trucking and hauling outlays of $495,385. The trucking and hauling outlays exhibit the following behavior:

Less than 1,800 tons	$	322,885
From 1,8002,299 tons		380,385
From 2,3002,799 tons		437,885
From 2,8003,299 tons		495,385

Lone Mountain Extraction 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.

Straight-line depreciation
Charitable contributions
Mining labor/fringe benefits
Royalties
Trucking and hauling

2.	Calculate the total cost for next February when 2,100 tons are expected to be extracted.

Total Cost

3-a.

Is hauling 1,800 tons with respect to Lone Mountains trucking/hauling cost behavior cost effective?

	Yes
	No

3-b.	Given the current scenario at what number of units cost effectiveness can be achieved?

Number of Units

4.

In times of economic difficulties, the management will cut which type of fixed costs?

	Discretionary fixed costs.
	Committed fixed costs.

5.

Speculate as to why the companys charitable contribution cost arises only in December. Choose the most relevant reason from the given options.

	To demonstrate social responsibility.
	To claim tax deduction.
	To promote business.