Camper and equipment: $ 120 Cost, $12,000; usable for eight seasons; 10 hunting

Question

Camper and equipment: $ 120 Cost, $12,000; usable for eight seasons; 10 hunting trips per season Travel expense (pickup truck): 100 miles at $0.39 per mile (gas, oil, and tires-s0.22 per mile; depreciation and insurance-$0.17 per mile) 39 30 Shotgun shells (two boxes per hunting trip) Boat: 29 Cost, $2,320, usable for eight seasons; 10 hunting trips per season Cost, $60 for the season; 10 hunting trips per season Loss, $30 (Bill plays poker every weekend whether he goes hunting or stays Hunting license: Money lost playing poker: 30 at home) Bottle of whiskey: Cost, $25 per hunting trip (used to ward off the cold) Total cost 25 $ 279 $ 35 Cost per duck ($279 ÷ 8 ducks) 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 10 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?

Explanation / Answer

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.

2. Since all of the costs that were relevant have now already been paid, they are now sunk costs and irrelevant. It wouldn't matter if he shot one duck or 15. So the last two ducks would cost nothing to shoot.

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