Bill has just returned from a duck hunting trip. He has brought home eight ducks
ID: 2536089 • 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
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
Bill has just returned from a duck hunting trip. He has brought home eight ducks. Bills 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: $180 Cost, $1,800; usable for eight seasons, 10 hunting trips per season Travel expense (pickup truck) 100 miles at $0.36 per mile (gas, oil, and tires-$0.20 per mile; depreciation and insurance -$0.16 per mile) Shotgun shells (two boxes) Boat 36 25 25 Cost, $2,000, usable for eight seasons; 10 hunting trips per season Hunting license Cost, $50 for the season; 10 hunting trips per season Money lost playing poker 26 15 $276 S 35 Loss, $26 (Bill plays poker every weekend) Bottle of whiskey: Cost, $15 (used to ward off the cold) Total cost Cost per duck ($276 8 ducks) Required: 1. Assuming that the duck hunting trip Bill has just completed is typical, what costs are relevant to a decision as to whether Bill should go duck hunting again this season?Explanation / Answer
SOLUTION
(1) The relevant costs of a hunting trip would be-
This answer assumes that Bill would not be drinking the bottle of whiskey anyway. It also assumes that the resale values of the camper, pickup truck, and boat are not affected by taking one more hunting trip.
The money lost in the poker game is not relevant because Bill would have played poker even if he did not go hunting. He plays poker every weekend.
The other costs are sunk at the point at which the decision is made to go on another hunting trip.
(2) If Bill gets lucky and bags another two ducks, all of his costs are likely to be about the same as they were on his last trip. Therefore, it really doesn’t cost him anything to shoot the last two ducks- except possibly the costs for extra shotgun shells. The costs are really incurred in order to be able to hunt ducks and would be the same whether one, two, three, or a dozen ducks were actually shot. All of the costs, with the possible exception of the costs of the shotgun shells, are basically fixed with respect to how many ducks are actually bagged during any one hunting trip.
Amount ($) Travel expense (100 miles @ $0.20 per mile) 20 Shotgun shells 25 One bottle of whisky 15 Total 60Related Questions
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