Question

Exercise 12-16 Identification of Relevant Costs (LO12-1) Bill has just returned from a duck hunting trip. He brought home eight ducks. Bill's friend, John, disapproves of duck hunting, and to E discourage Bill from further hunting, John presented him with the following cost estimate per duck: 161 Camper and equipment: Cost, $18,000; usable for eight seasons; 14 hunting trips per season $ Travel expense (pickup truck): 100 miles at $0.46 per mile (gas, oil, and tires $0.28 per mile; depreciation and insurance $0.18 per mile) Shotgun shells (two boxes per hunting trip) Boat: Cost, $2,320, usable for eight seasons; 14 hunting trips per season Hunting license: Cost, $70 for the season; 14 hunting trips per season Money lost playing poker: Loss, $40 (Bill plays poker every weekend whether he goes hunting or stays at home) Bottle of whiskey: Cost, $20 per hunting trip (used to ward off the cold) Total cost $ Cost per duck ($313 - 8 ducks) $ 313 39 Required: 1. Assuming the duck hunting trip Bill has just completed is typical, what costs are relevant to a decision as to whether Bill should go Educk hunting again this season? 2. Suppose Bill gets lucky on his next hunting trip and shoots 14 ducks using the same amount of shotgun shells he used on his previous hunting trip to bag 8 ducks. How much would it have cost him to shoot the last six ducks?

Answer 1

1) Relevant cost
travel expenses (100 miles*0.28)				28
shotgun shells				20
one bottle of whiskey				20
total relevant cost				68
2) the relevant cost incurred to shoot the ducks
will be same , cost incurred on trip basis not per duck basis
shooting 8 ducks or 10 would not affect cost incurred
hence cost to shoot 8 ducks will be nil

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