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Cordero employed trucks and shovels at the Gillette
mine to remove the overburden and to strip mine the exposed
coal. The expenses that Cordero incurred in removing
overburden and extracting coal at the Gillette mine
included the salaries and wages paid to employees who
operated the equipment, depreciation on and repairs to the
equipment, fuel for the equipment, utilities, and employee
benefits.
Cordero quantified its overburden removal costs at
the Gillette mine using a volumetric ratio method. Cordero
first determined the volume of overburden that was removed
during the year, and it computed the ratio of that amount
to the sum of the volumes of overburden removed and coal
extracted. Cordero then multiplied the ratio by the total
of each category of expense incurred in the process of
removing overburden and extracting coal (viz, wages and
benefits, fuel, utilities, depreciation, and repairs). The
product of each of these multiplications was deemed to be
the portion of each expense category that was attributable
to the overburden removed during the year. Using this
method, Cordero computed its aggregate overburden removal
costs at the Gillette mine for the years in issue. These
aggregate amounts are as follows:
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Last modified: May 25, 2011