Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please be descriptive and show all work step-by-step. Antioch Extraction, which mines ore in Montana, uses a calendar year for both financial-reporting and tax purposes.
Please be descriptive and show all work step-by-step.
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: Problem 6-37 Cost Behavior and Analysis High-Low Method (LO 6-2, 6-4, 6-5) $ 25,000 11,000 345,000 Royalties Trucking and hauling $135,000 275,000 Straight-line depreciation Charitable contributions* Mining labor/fringe benefits *Incurred only in December. 2. Total cost for 1,650 tons: $823,500 Peak activity of 2,600 tons occurred in June, resulting in mining labor/fringe benefit costs of $598,000, royalties of $201,000, and trucking and hauling outlays of $325,000. The trucking and hauling outlays exhibit the following behavior: Less than 1,500 tons From 1,500-1,899 tons From 1,9002,299 tons From 2,300-2,699 tons $250,000 275,000 300,000 325,000 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. Show calculations to support your answers for mining labor/fringe benefits and royalties. 2. Calculate the total cost for next February when 1,650 tons are expected to be extracted. 3. Comment on the cost-effectiveness of hauling 1,500 tons with respect to Antiochs trucking/haul- ing cost behavior. Can the company's effectiveness be improved? How? 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? Why? 5. Speculate as to why the company's charitable contribution cost arises only in DecemberStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started