Question

12. value: 1.25 points Bill has just returned from a duck hunting trip. He has brought home eight ducks. Bill's friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John has presented him with the following cost estimate per duck: $230.00 43.00 25.00 Camper and equipment: Cost, $18,400; usable for eight seasons; 10 hunting trips per season Travel expense (pickup truck): 100 miles at $0.43 per mile (gas, oil, and tires—$0.24 per mile; depreciation and insurance —$0.19 per mile) Shotgun shells (two boxes) Boat: Cost, $2,080, usable for eight seasons; 10 hunting trips per season Hunting license: Cost, $80 for the season; 10 hunting trips per season Money lost playing poker: Loss, $24 (Bill plays poker every weekend) Bottle of whiskey: Cost, $20 (used to ward off the cold) 26.00 8.00 24.00 20.00 Total cost $376.00 Cost per duck ($376.00 + 8 ducks) $47.00 Required: 1. Assuming that the duck hunting trip Bill has just completed is typical, what costs are relevant to a decision as to whether Bill should go duck hunting again this season? Total 2. Suppose that Bill gets lucky on his next hunting trip and shoots 10 ducks in the amount of time it took him to shoot 8 ducks on his last trip. How much would it have cost him to shoot the last two ducks? Cost of last two ducks

Answer 1

Answer

Requirement-1

The relevant costs are

travel expense=43

shotgun shells=25

Bottle of whiskey=20

Total relevant cost=43+25+20=88

NOTE - Rest of all the cost are sunk cost as they are already incurred irrespective of whether bill goes for hunting or not.

Cost per duck=88/8=11

Requirement-2

If bill shoots 10 ducks the total relevant cost will remain the same.

If we consider the cost per duck calculated from (a) then the last two ducks do not incur any cost.

hence cost for last two ducks=0

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