Question
Theta Ltd is a public company listed on the Australian Securities Exchange (ASX). It currently operates in one area of interest Beta. Beta Area of
Theta Ltd is a public company listed on the Australian Securities Exchange (ASX). It currently operates in one area of interest Beta.
Beta Area of Interest:
Beta is located in Western Queensland. On 1 January 2019, Theta Ltd acquired a 28-year lease on a mining property in the Beta Area of Interest for $54 million and during 2019 spent $4 050 000 developing the property.
In addition to the development costs, Theta Ltd incurred the following construction costs:
Item Cost Estimated life
Railroad and associated equipment $8 100 000 35 years
Other mine equipment 2 600 000 10 years
The railroad and associated equipment cannot be moved to another site and will have a residual value of zero once the ore deposit is fully depleted. The other mine equipment can be dismantled and used at another mine site. The other mine equipment has an estimated residual value of zero at the end of its estimated useful life.
Production at the Beta property commenced on 1 January 2021. In late December 2020, company geologists estimated that the mining property would produce 112.5 million tonnes of ore and it is assumed that the property will have a residual value of $450 000 after the ore deposit is exhausted.
A summary of activities for the year ended 31 December 2021 is as follows:
Production and sales (in tonnes):
Tonnes of ore mined 4 500 000
Tonnes of ore sold (at $12 per tonne) 4 050 000
Revenues and costs:
Production costs (excluding depreciation and amortisation) $13 500 000
Administration expenses $1 800 000
Selling expenses $810 000
Income tax expense $6 750 000
The financial year for Theta Ltd is from 1 January to 31 December.
REQUIRED:
1. Calculate the production cost per tonne for the year ended 31 December 2021. Show all working and provide any explanations necessary to support your answer. (Please round your answer to 4 decimal places).
2. What is the gross profit reported for the year ended 31 December 2021?
3. What is the net profit after tax reported for the year ended 31 December 2021?
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