Question: Sawyer Dredging mines ore in Wyoming. The following selected costs were incurred in December, the low
Question:
Question:
Sawyer Dredging mines ore in Wyoming. The following selected costs were incurred in December, the low point of activity when 2,800 tons of ore were extracted:
| Straight Line Depreciation | $60,000 |
| 2,800-3,799 Tons | $630,000 |
| 3,800-4,799 Tons | $280,000 |
| 4,800-5,799 Tons | $560,000 |
The highest level activity of 5,400 tons of ore extracted occurred in August, resulting in labor costs of $1,215,000, mining royalties of $449,000 and trucking & hauling outlays of $720,000. The trucking & hauling outlays exhibit the following behavior:
| Less than 2,800 | $480,000 |
| 2,800-3,799 | $560,000 |
| 3,800-4,799 | $640,000 |
| 4,800-5,799 | $720,000 |
Sawyer Dredging utilizes the high-low method to analyze cost behavior.
a. Classify the four costs listed above in terms of their behavior: that is, whether each is variable, step-variable, committed fixed, discretionary fixed, step-fixed, or semi-variable. Show calculations to support your answers for labor and mining royalties.
b. Calculate the total cost for next April when 3,400 tons are expected to be extracted. Show all calculations used to determine this cost.
c. Comment on the cost-effectiveness of hauling 2,800 tons with respect to Lone Mountain's trucking & hauling costs.
d. How can the company's operational effectiveness be improved?
Expert Answer:
Answer Given Straight Line Depreciation 60000 28003799 TonsMining labo 630000 38004799 Tons... View the full answer
