Problem 1: Cost behaviour: Committed and discretionary costs: high-low method Delta Mining Limited (DML), have mines ore in Australia's north-west, uses a calendar year for financial reporting purposes. The following selected costs were incurred in December, the low point of activity, when 1 400 tonnes of ore were extracted Straight-line depreciation Charitable contributions Mining labour (including on costs) Royalties Trucking and haulage incurred only in December S 30 000 12 000 315 000 140 000 240 000 Peak activity of 2 700 tonnes occur red in June, resulting in mining labour costs (including on costs) of S607 500, royalties of S224 500, and trucking and haulage costs of S360 000. The trucking and haulage costs exhibit the following behaviour: $240 000 280 000 320 000 360 000 Less than 1 500 tonnes From 1 500 1899 tonnes From 1 900-2 299 tonnes From 2 300-2 699 tonnes DML uses the high-low method for analysing cost behaviour Required 1. Assuming that royalties are a semi-variable cost, classify each of the other four costs listed above in terms of their behaviour as variable, step-variable, committed fixed, discretionary fixed, step- fixed or semi-variable. Show calculations to support your answers for mining labour costs 2. Calculate the total costs for next February when 1 650 tonnes of ore are expected to be extracted. 3. Comment on the cost effectiveness of hauling 1 500 tonnes with respect to DML's trucking haulage cost. Can the company's cost effectiveness be improved? How? 4. Distinguish between committed and discretionary fixed costs. If DML were to experience severe economic difficulties, which of the two types of fixed costs should management try to cut? Explain why