Variable costs and fixed costs. Consolidated Minerals (CM) owns the rights to extract minerals from the beach sands on Fraser Island. CM has costs in three areas: a) Payment to a mining subcontractor who charges $80 per ton of beach sand extracted and returned to the beach (after processing on the mainland to extract three minerals: ilmenite, rutile and zircon). b) Payment of special taxes on mining and ecology of $50 per ton of extracted beach sand. c) Payment to a transport vessel operator. This operator charges $150,000 per month for the transport of each batch of beach sand up to 100 tonnes per batch per day to the mainland and for the subsequent return to Fraser Island (i.e. 0 to 100 tonnes per day = $150,000 per month; 101 to 200 tons per day = $300,000 per month, and so on). Each ship operates 25 days per month. The $150,000 monthly charge must be paid even if less than 100 tons are transported on any given day, and even if CM requires less than 25 days of transportation per vessel in that month. CM currently extracts 180 tons of beach sand per day for 25 days a month. 

1. What is the variable cost per ton of beach sand extracted? What is the monthly fixed cost for CM? 

2. Prepare a graph of the variable costs and another graph of the fixed costs of CM. Your graphs should look similar to illustrations 2-3, panel A . Is the concept of relevant range applicable to your graphs? Explain why. 

3. What is the unit cost per ton of beach sand extracted, a) if 180 tons per day are extracted, and b) if 220 tons per day are extracted? 

Explain the difference in the unit cost figures. 2-23 Variable costs, fixed costs, relevant range.