Sininsky Mining, Inc., has just discovered two new mining sites for iron ore. Geologists and engineers have come up with the following estimates regarding costs and ore yields if the mines are opened: Site A Site B Variable extraction costs per ton $ 3.80 $ 4.00 Fixed costs over the life of the mine: Blasting 150,000 185,000 Construction 225,000 240,000 Maintenance 25,000 20,000 Restoration costs 40,000 35,000 Total fixed costs $440,000 $480,000 Total tons of ore extracted over the life of the mine: 200,000 160,000 Sininsky's owners currently demand a return of 19 percent of the market price of iron ore.
a. if the current market price of iron ore is $8.17 per ton, what is Sininsky's target cost per ton? Target cost?
b. given the $8.17 market price, compute the total cost per ton for Site A and site B? Site A total cost per ton? Site B total cost per ton?
c. The engineer working on Site B believes that if a custom conveyor system is installed, the variable extraction cost could be reduced to $3 per ton. The purchase price of the system is $25,000, but the costs to restore the site will increase to $45,000 if it is installed. Given the current $8.17 per ton market price, compute the new total cost per ton for Site B Site B total cost per ton?