Question

Which one of the following does not belong to the direct operating cost of a mine?

• A. Administrative cost
• B. Royalty
• C. Fuel cost
• D. Explosive cost

Hint:

Understanding direct vs. indirect costs helps in accurate financial planning and cost management in mining operations.

Answer 1

The Correct Option is A

Direct operating costs of a mine include expenses directly associated with the extraction and processing of minerals, such as fuel cost (option 3) for machinery, explosive cost (option 4) for blasting, and labor costs. Royalty (option 2) is a payment to the mineral rights owner and is often considered an indirect cost, but in some contexts, it may be treated as a direct cost depending on accounting practices. Administrative cost (option 1), however, typically covers overhead expenses like office management, salaries of non-production staff, and other indirect costs, making it the least likely to be classified as a direct operating cost. Thus, the correct answer is Administrative cost.