QUESTION 3 Cape Town Minerals (CTM) owns the rights to extract minerals from bea

Question

QUESTION 3 Cape Town Minerals (CTM) owns the rights to extract minerals from beach sands. CTM has costs in three areas: (a) Payment to a mining subcontractor who charges $80 per tonne 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 tonne of beach ative co 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 tonnes per batch per day -to the mainland and then return to Fraser Island (i.e., 0-100 tonnes per day $150,000 per month, 101-200 tonnes per day $300,000 per month, and 201-300 tonnes per day $450,000). Each barge operates 25 days per month. The $150,000 monthly charge must be paid even if fewer than 100 tonnes are transported on any day and even if CTM requires fewer than 25 days of barge transportation in that month. Required (a) What is the variable cost per tonne of beach sand mined? (b) What is the fixed cost per to CTM per month? (c) What is the unit cost per tonne of beach sand mined if 99 tonnes are mined each day?

Explanation / Answer

a) Variable Cost Subcontractor $            80.00 Tax 50 Total varaible cost pet Tonne $          130.00 b) Fixed Cost per month $        150,000 c) Unit cost for 99 Tonnes Varibale Cost @130 321750 =99*130*25 Fixed Cost 150000 Total Cost 471750 Number of units 2475 (99*25) Per unit Cost              190.61 (471750/2475)

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