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:

Camper and equipment:
Cost, $15,000; usable for eight seasons; 10 hunting trips per season	$	188
Travel expense (pickup truck):
100 miles at $0.46 per mile (gas, oil, and tires—$0.26 per mile; depreciation and insurance—$0.20 per mile)		46
Shotgun shells (two boxes per hunting trip)		30
Boat:
Cost, $2,080, usable for eight seasons; 10 hunting trips per season		26
Hunting license:
Cost, $70 for the season; 10 hunting trips per season		7
Money lost playing poker:
Loss, $28 (Bill plays poker every weekend whether he goes hunting or stays at home)		28
Bottle of whiskey:
Cost, $10 per hunting trip (used to ward off the cold)		10
Total cost	$	335
Cost per duck ($335 ÷ 8 ducks)	$	42

  

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?

Answer 1

Answer 1)

The relevant cost to analyse whether Bill has to go hunting this season are as follows:

Camper and equipment- Not relevant since the cost is already incurred for 8 seasons and we are not going to incur additional cost for the coming season

Travel expense- To be considered as it is variable and would incur only if bill goes for hunting

Shotgun shells- Relevant as the cost is specific to the trip

Boat- Not relevant as the cost is already incurred for 8 seasons and no additional cost would be incurred for the coming trip

Hunting license- Not relevant since already incurred for the entire current season

Money lost playing poker- Not relevant as the cost would be incurred irrespective of Bill going for hunting or not.

Bottle of whiskey- Relevant as the cost would incur only if Bill goes for hunting

Answer 2)

Revised costs to be considered when Bill goes for hunting are:

Travel expense= 46

Shotgun shells= 30

Bottle of Whiskey= 10

Total cost= $86 per trip

If Bill shoots 10 ducks instead of 8 ducks in his coming trip the cost of the same would be =86/10 i.e $8.6 per duck.

The cost of two ducks would be $8.6 per duck.