a. What is the variable cost per ton of beach sand mined? What is the fixed cost to CM per month? b. Plot a graph of the variable costs and another graph of the fixed costs of CM. c. What is the unit cost per ton of beach sand mined (a) if 180 tons are mined each day and (b) if 220 tons are mined each day? Explain the difference in the unit-cost figures.
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- Consolidated Minerals (CM) owns the rights to extract minerals from 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 mined and returned to the beach (after being processed on the mainland to extract three minerals: ilmenite, rutile, and zircon). b. Payment of a government mining and environmental tax of $50 per ton of beach sand mined. c. Payment to a barge operator. This operator charges $150,000 per month to transport each batch of beach sand—up to 100 tons per batch per day—to the mainland and then return to Fraser Island (that is, 0 to 100 tons per day = $150,000 per month; 101 to 200 tons per day = $300,000 per month, and so on). Each barge operates 25 days per month. The $150,000 monthly charge must be paid even if fewer than 100 tons are transported on any day and even if CM requires fewer than 25 days of barge transportation in that month. CM is currently mining 180 tons of beach sands per day…Consolidated Minerals (CM) owns the rights to extract minerals from beach sands on Fraser Island. CM has costs in three areas: Payment to a mining subcontractor who charges $80 per ton of beach sand mined and returned to the beach (after being processed on the mainland to extract three minerals: ilmenite, rutile, and zircon). Payment of a government mining and environmental tax of $50 per ton of beach sand mined. Payment to a barge operator. This operator charges $150,000 per month to transport each batch of beach sand—up to 100 tons per batch per day—to the mainland and then return to Fraser Island (that is, 0 to 100 tons per day = $150,000 per month; 101 to 200 tons per day = $300,000 per month, and so on). Each barge operates 25 days per month. The $150,000 monthly charge must be paid even if fewer than 100 tons are transported on any day and even if CM requires fewer than 25 days of barge transportation in that month. CM is currently mining 180 tons of beach sands per day for…Sunset Mountain Mining paid $362,300 for the right to extract mineral assets from a 350,000-ton deposit. In addition to the purchase price, Sunset also paid a $300 filing fee, a $2,400 license fee to the state of Nevada, and $55,000 for a geological survey of the property. Because Sunset purchased the rights to the minerals only and did not purchase the land, it expects the asset to have zero residual value. During the first year, Sunset removed and sold 40,000 tons of the minerals. Make journal entries to record (a) purchase of the minerals (debit Minerals), (b) payment of fees and other costs, and (c) depletion for the first year. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
- Your client, Portsmouth Mining, recently entered into an agreement to obtain the rights to operate a coal mine in Virginia for $15 million. Portsmouth incurred development costs of $6 million in preparing the mine for extraction, which began on Jul 1, 2021. The contract requires Portsmouth to restore the land and surrounding area to its original condition after extraction is complete in three years. The company controller, Anna Dickson, is not sure how to account for the restoration costs and has asked your advice. Anna is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20% $ 4 million 30% $ 5 million 25%…7 Oman Drydock Company purchased a site near Barka for OMR 25000. In addition to the purchase price the company agreed to pay OMR 3000 of unpaid tax (outstanding) on the property. There was an old construction on the site on which company spent OMR5000 for its removal and the company received the additional income of OMR 1500 from sale of scrap of the old construction. The company also paid OMR 500 agent’s commission and OMR 1500 legal and registration charges. Find out the cost of the asset. a. OMR 35000 b. OMR 33500 c. OMR 28000 d. OMR 25000 Clear my choiceOn April 23, 2021, Phillip Mining entered into an agreement with the state of California to obtain the rights to operate a mineral mine in California for $12 million. Additional costs and purchases included the following: Preparation of site for excavation $ 4,800,000 Mining equipment 360,000 Construction of various structures on site 240,000 8After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $60,000. The structures will be torn down. The mine is expected to produce 1,400,000 tons of ore. After the ore is removed, the land will revert back to the state of California. During 2021, Philips extracted 210,000 tons of ore from the mine. What total amount would be charged to depletion of the mine and depreciation of the mining equipment and structures for 2021, assuming that Phillip uses the units-of-production method for both depletion and depreciation?…
- Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue. Research…Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue.…Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue.…
- Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue.…Dungan Corporation is evaluating a proposal to purchase a new drill press to replace a less efficient machine presently in use. The cost of the new equipment at time 0, including delivery and installation, is $260,000. If it is purchased, Dungan will incur costs of $7,400 to remove the present equipment and revamp its facilities. This $7,400 is tax deductible at time 0. Depreciation for tax purposes will be allowed as follows: year 1, $64,000; year 2, $94,000; and in each of years 3 through 5, $54,000 per year. The existing equipment has a book and tax value of $124,000 and a remaining useful life of 10 years. However, the existing equipment can be sold for only $64,000 and is being depreciated for book and tax purposes using the straight-line method over its actual life. Management has provided you with the following comparative manufacturing cost data. Present Equipment New Equipment Annual capacity (units) 424,000 424,000 Annual costs: Labor $ 60,000…Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2016. The contract requires Hazelton to restore the land and surrounding area to their original condition after extraction is complete in three years. The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities: Cash Outflow Probability $3 million 20% 4 million 30% 5 million 25% 6 million 25% Alice also…