Question

Perez company acquires an ore mine at a cost of 2100000. It incurs additional costs of 588000 to access the mine, which is estimated to hold 1500000 tons of ore 205000 tons of ore mined and sold the first year.

Answer 1

The question involves business calculations in mining, focusing on costs, economic profit, and resource depletion. Important considerations include the R/P ratio for the mine's life and the role of infrastructure in supporting mining operations.

Step-by-step explanation:

The question pertains to the subject of business, particularly focusing on the aspects of cost calculation and asset depletion in mining operations. The scenario involves Perez company acquiring a mine and incurring additional costs to access it. Understanding the economic profit and calculating the profit after the explicit and implicit costs have to be accounted for. The consumption rate of the mining resources, their availability, and the reserves to production (R/P) ratio are pertinent in forecasting the life of the mine. Moreover, the sustainable exploitation of ore with the depleting high-grade deposits is a significant consideration in the economics of mining.

Mining operations shifted in the late 19th century, requiring more capital and machinery, indicating the transition to more significant business investments. The historical context shows how the best deposits of minerals have already been exploited, leading to the necessity of more considerable investment for future mining. The Grand Carajás Project illustrates the economic activities tied to mining, emphasizing the importance of infrastructure such as power and transportation.

Answer 2

$367,360

Step-by-step explanation:

Depletion is an estimated cost of a natural resource that is extracted. This resource is expensed as the extraction is made.

As per given data

Value of Rights = $2,100,000

Additional Cost = $588,000

Total Cost = $2,100,000 + $588,000 = $2,688,000

Estimated resources = 1,500,000 tons

Resources extracted in the period = 205,000 tons

Depletion expense is based on ratio of the amount of extraction in period to the total expected resource.

Depletion Expenses = Total Cost x Resources Extracted in the period / Total resource

Depletion Expenses = Total Cost x Resources Extracted in the period / Total resource

Depletion Expenses = $2,688,000 x 205,000 / 1,500,000 tons = $367,360