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

Answer 1

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