Reference no: EM132507920

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 1,700 tons of ore were extracted:

Straight-line depreciation$41,000

Charitable contributions* 12,000

Mining labor/fringe benefits 348,500

Royalties 131,000 Trucking and hauling 344,895

*Incurred only in December.

Peak activity of 3,000 tons occurred in June, resulting in mining labor/fringe benefit costs of $615,000, royalties of $196,000, and trucking and hauling outlays of $449,895. The trucking and hauling outlays exhibit the following behavior:

Less than 1,700 tons$292,395

From 1,700-2,199 tons 344,895

From 2,200-2,699 tons 397,395

From 2,700-3,199 tons 449,895

• Antioch uses the high-low method to analyze costs.

Required:

Question 1. Classify the five costs listed in terms of their behavior: variable, step-variable, committed fixed, discretionary fixed, step-fixed, or semivariable.

Question 2. Calculate the total cost for next February when 2,000 tons are expected to be extracted.

Question 3-a. Is hauling 1,700 tons with respect to Antioch's trucking/hauling cost behavior cost-effective?

Question 3-b. If the company plans to extract 1,700 tons, at what number of tons can cost-effectiveness be achieved?