In 2010, Newman Company Paid $1,000,000 to Purchase Land Containing

question 12

Multiple Choice

In 2010, Newman Company paid $1,000,000 to purchase land containing a total estimated 160,000 tons of extractable mineral deposits. The estimated value of the property after the mineral has been removed is $200,000. Extraction activities began in 2011, and by the end of the year, 20,000 tons had been recovered and sold. In 2012, geological studies indicated that the total amount of mineral deposits had been underestimated by 25,000 tons. During 2012, 30,000 tons were extracted, and 28,000 tons were sold. What is the depletion rate per ton (rounded to the nearest cent) in 2012?

• A) $4.24
• B) $4.32
• C) $4.85
• D) $5.19

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Definitions:

Overhead Costs

Expenses not directly tied to the production of goods or services, such as rent, utilities, and insurance.

Overhead Costs

Expenses that are not directly tied to production activities, such as rent, utilities, and administrative expenses.

Batch-level Activities

Operations carried out on groups or batches of units rather than on individual units, often incurring costs that are common to the batch rather than to a single unit.

Batch-level Activity Cost

Costs associated with activities that are related to a batch of products rather than each individual unit, such as the cost of setting up machinery for each batch.