ABC, Inc. purchased for $3,800,000 a mine estimated to contain 2.5 million tons

Question

ABC, Inc. purchased for $3,800,000 a mine estimated to contain 2.5 million tons of ore. When the ore is completely extracted, it was expected that the land would be worth $200,000. A building and equipment costing $1,800,000 were constructed on the mine site, and they will be completely used up and have no salvage value when the ore is exhausted. During the first year, 750,000 tons of ore were mined, and $300,000 was spent for labor and other operating costs.

Compute the total cost per ton of ore mined in the first year, by completing the following schedule:

Item

Base

Tons

Per Ton

Item

Base

Tons

Per Ton

Explanation / Answer

Cost of mine            3,800,000 Total Ore in tonnes            2,500,000 Scrap value                200,000 Building and equip            1,800,000 Output year 1                750,000 Labour and operating cost                300,000 Mine cost / Ton                     1.440 Build and equip /Ton                     0.720 Labour/Ton                       2.50 Item Base Tons Per Ton Mine cost / Ton    3,600,000.000    2,500,000 1.44 Build and equip /Ton    1,800,000.000    2,500,000 0.72 Labour/Ton        300,000.000       750,000 0.4 Total cost per ton 2.56

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