Question

Steve has just returned from salmon fishing. He was lucky on this trip and brought home 2 salmon. Steve’s wife, Wendy, disapproves of fishing, and to discourageSteve from further fishing trips, she has presented him with the following cost data. The cost per fishing trip is based on an average of 10 fishing trips peryear.

Cost per fishing trip:
Depreciation on fishing boat* (annual depreciation of $1,700 ÷ 10 trips)	$	170
Boat storage fees (annual rental of $1,700 ÷ 10 trips)		170
Expenditures on fishing gear, except for snagged lures (annual expenditures of $210 ÷ 10 trips)		21
Snagged fishing lures		7
Fishing license (yearly license of $80 ÷ 10 trips)		8
Fuel and upkeep on boat per trip		28
Junk food consumed during trip		5
Total cost per fishing trip	$	409
Cost per salmon ($409 ÷ 2 salmon)	$	204.50

*The original cost of the boat was $17,000. It has an estimated useful life of 10 years, after which it will have no resale value. The boat does notwear out through use, but it does become less desirable for resale as it becomes older.

Required:
1.	Assuming that the salmon fishing trip Steve has just completed is typical, what costs are relevant to a decision as to whether he should go on anothertrip this year? (Omit the "$" sign in your response.)

Total relevant cost

$

2.

Suppose that on Steve’s next fishing trip he gets lucky and catches three salmon in the amount of time it took him to catch two salmon on his lasttrip. How much would the third salmon have cost him to catch? (Leave no cells blank - be certain to enter "0" whereverrequired. Omit the "$" sign in your response.)

Cost of third salmon

$

Answer 1

Required:
1.	Assuming that the salmon fishing trip Steve has just completed is typical, what costs are relevant to a decision as to whether he should goon another trip this year?

Cost of Boat, Fishing Lic &Boat storage fee are Sunk costs or fixed costs &will be incurred even if no fishing take splace.

Relevant costs are those which will be incurred if fishing takes place &are variable costs.

Total relevant cost $61

2.	Suppose that on Steve’s next fishing trip he gets lucky and catches three salmon in the amount of time it took him to catch two salmon onhis last trip. How much would the third salmon have cost him to catch?

Per trip cost of Steve is $409 wheher he catches NIL Salmon or more. As there is no change in Var costs when no of salmon changes, we can say that costof 3rd Salmon is '0'