Bill has just returned from a duck hunting trip. He brought home eight ducks. Bi

Question

Bill has just returned from a duck hunting trip. He brought home eight ducks. Bill’s friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John presented him with the following cost estimate per duck:

  

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 duck 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 two ducks?

Camper and equipment: Cost, $15,000; usable for 10 seasons; 14 hunting trips per season $ 107 Travel expense (pickup truck): 100 miles at $0.38 per mile (gas, oil, and tires—$0.28 per mile; depreciation and insurance—$0.10 per mile) 38 Shotgun shells (two boxes per hunting trip) 20 Boat: Cost, $2,400, usable for eight seasons; 14 hunting trips per season 21 Hunting license: Cost, $70 for the season; 14 hunting trips per season 5 Money lost playing poker: Loss, $24 (Bill plays poker every weekend whether he goes hunting or stays at home) 24 Bottle of whiskey: Cost, $20 per hunting trip (used to ward off the cold) 20 Total cost $ 235 Cost per duck ($235 ÷ 8 ducks) $ 29

Explanation / Answer

1 The only relevant costs are: Camper and equipment: Travel expense (pickup truck): 100 miles at (gas, oil, and tires—$0.28 per mile) 28 Shotgun shells (two boxes) 20 Bottle of whiskey: Cost, $20 (used to ward off the cold) 20 Total relevant costs are 68 All other costs are either "sunk" costs or they won't change whether he goes hunting or not 2 Since all the costs are already been paid, they are now sunk costs and irrelevant. So, there is no change in cost depending on the no. of ducks he shoot. So the last two ducks would cost nothing to shoot.

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