Kotter Mining Company Purchases a Gravel Pit for $2,500,000 $\quad 465,000$

question 59

Multiple Choice

Kotter Mining Company purchases a gravel pit for $2,500,000.It estimates that 5,000,000 tons of gravel can be extracted over the pit's useful life.If 930,000 tons are extracted and sold during the first year,the entry to record the depletion expense is:

• A)
• Depletion Expense - Gravel pit \(\quad 465,000\)
• Accumulated Depletion - Gravel pit \(\quad 465,000\)
• B)
• Depletion Expense - Gravel pit \(\quad 116,250\)
• Accumulated Depletion - Gravel pit \(\quad 116,250\)
• C)
• Depletion Expense - Gravel pit \(\quad 232,500\)
• Accumulated Depletion - Gravel pit \(\quad 232,500\)
• D)
• \[\begin{array} { l }
• \text { Depletion Expense - Gravel pit } &348,750 \\
• \quad \text { Accumulated Depletion - Gravel pit }&&348,750
• \end{array}\]

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Definitions:

Manufacturing Overhead

The indirect costs related to manufacturing that are not directly tied to a specific product, such as factory rent, maintenance, and utilities.

Job Cost Accuracy

The precision with which a company estimates and tracks the costs associated with specific jobs or projects.

Overhead Cost Driver

A factor that causes the cost of overheads to change, such as machine hours or labor hours.

Predetermined Overhead Rate

A rate estimated before a period begins, used to allocate overhead costs to products or job orders based on a chosen activity base.