Bill has just returned from a duck hunting trip. He has brought home eight ducks
ID: 2444485 • Letter: B
Question
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: Camper and equipment: Cost, $1,800; usable for eight seasons; 10 hunting trips per season $ 180 Travel expense (pickup truck): 100 miles at $0.32 per mile (gas, oil, and tires—$0.20 per mile; depreciation and insurance —$0.12 per mile) 32 Shotgun shells (two boxes) 20 Boat: Cost, $2,080, usable for eight seasons; 10 hunting trips per season 26 Hunting license: Cost, $80 for the season; 10 hunting trips per season 8 Money lost playing poker: Loss, $34 (Bill plays poker every weekend) 34 Bottle of whiskey: Cost, $25 (used to ward off the cold) 25 Total cost $ 293 Cost per duck ($293 ÷ 8 ducks) $ 37 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?
Explanation / Answer
Answer: Assuming that the duck hunting trip Bill has just completed is typical, calculate the total cost which is relevant to a decision as to whether Bill should go duck hunting again this season?
The only relevant costs are:
Camper and equipment:
Travel expense (pickup truck):
100 miles at (gas, oil, and tires—$0.20 per mile) 20
Shotgun shells (two boxes) 20
Bottle of whiskey:
Cost, $25 (used to ward off the cold) 25
Total relevant costs are $65
All other costs are either "sunk" costs or they won't change whether he goes hunting or not i.e., truck depreciation, insurance, poker losses.
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