Lone Mountain Extraction, which mines ore in Idaho, 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 1,400 tons of ore were extracted:
|
|
|
|
| Straight-line depreciation |
$ |
30,000 |
|
| Charitable contributions* |
|
12,000 |
|
| Mining labor/fringe benefits |
|
315,000 |
|
| Royalties |
|
140,000 |
|
| Trucking and hauling |
|
280,000 |
|
|
| *Incurred only in December. |
|
Peak activity of 2,700 tons occurred in June, resulting in mining labor/fringe benefit costs of $607,500, royalties of $224,500, and trucking and hauling outlays of $360,000. The trucking and hauling outlays exhibit the following behavior:
|
|
|
|
|
| Less than 1,400 tons |
$ |
240,000 |
|
| From 1,400-1,899 tons |
|
280,000 |
|
| From 1,900-2,399 tons |
|
320,000 |
|
| From 2,400-2,899 tons |
|
360,000 |
|
|
Lone Mountain Extraction uses the high-low method to analyze costs.
|
Given the current scenario at what number of units cost effectiveness can be achieved?