Question

Exercise 11-16 Identification of Relevant Costs [LO11-1]

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, $11,000; usable for eight seasons; 10 hunting trips per season	$	138
Travel expense (pickup truck):
100 miles at $0.39 per mile (gas, oil, and tires—$0.22 per mile; depreciation and insurance—$0.17 per mile)		39
Shotgun shells (two boxes per hunting trip)		35
Boat:
Cost, $2,160, usable for eight seasons; 10 hunting trips per season		27
Hunting license:
Cost, $50 for the season; 10 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, $15 per hunting trip (used to ward off the cold)		15
Total cost	$	283
Cost per duck ($283 ÷ 8 ducks)	$	35

  

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

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?

		$
1	Travel Expense	$39
	Shotgun shells	$35
	One bottle of whiskey	$15
		$89

1. Suppose that Bill gets lucky on his next hunting trip and shoots 10 ducks in the amount of time it took him to shoot 8 ducks on his last trip. How much would it have cost him to shoot the last two ducks?

$0, since he incurs no other additional expenses to shoot extra two ducks