Mel Cheek is a fishing guide on the Chenega River. The fish are usually found 20 to 50 miles upriver. Once the fish are located, Mel slows the boat to trolling speed and fishes for about 6 hours before returning to dock. Mel has noted that overall fuel costs vary based on "miles upriver" and he is considering changing his guide fee to separately charge customers for estimated fuel costs. Below is Mel's log for 15 typical days showing "miles upriver to locate fish" and "total fuel cost". Day Miles Upriver Fuel Cost 1 37 $86 2 41 93 3 22 73 4 28 80 5 49 99 6 25 74 7 33 85 8 37 87 9 44 93 10 24 77 11 29 80 12 45 96 13 35 83 14 36 87 15 31 80 Total 516 $1,273 If the sole objective of the fuel charge is to approximately recover actual costs incurred each day, would "$2.50 per mile upriver" be a fair formula? What alternative formula might you suggest?
Mel Cheek is a fishing guide on the Chenega River. The fish are usually found 20 to 50 miles upriver. Once the fish are located, Mel slows the boat to trolling speed and fishes for about 6 hours before returning to dock. Mel has noted that overall fuel costs vary based on "miles upriver" and he is considering changing his guide fee to separately charge customers for estimated fuel costs. Below is Mel's log for 15 typical days showing "miles upriver to locate fish" and "total fuel cost". Day Miles Upriver Fuel Cost 1 37 $86 2 41 93 3 22 73 4 28 80 5 49 99 6 25 74 7 33 85 8 37 87 9 44 93 10 24 77 11 29 80 12 45 96 13 35 83 14 36 87 15 31 80 Total 516 $1,273 If the sole objective of the fuel charge is to approximately recover actual costs incurred each day, would "$2.50 per mile upriver" be a fair formula? What alternative formula might you suggest?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Mel Cheek is a fishing guide on the Chenega River. The fish are usually found 20 to 50 miles upriver. Once the fish are located, Mel slows the boat to trolling speed and fishes for about 6 hours before returning to dock. Mel has noted that overall fuel costs vary based on "miles upriver" and he is considering changing his guide fee to separately charge customers for estimated fuel costs. Below is Mel's log for 15 typical days showing "miles upriver to locate fish" and "total fuel cost".
| Day | Miles Upriver | Fuel Cost | |
| 1 | 37 | $86 | |
| 2 | 41 | 93 | |
| 3 | 22 | 73 | |
| 4 | 28 | 80 | |
| 5 | 49 | 99 | |
| 6 | 25 | 74 | |
| 7 | 33 | 85 | |
| 8 | 37 | 87 | |
| 9 | 44 | 93 | |
| 10 | 24 | 77 | |
| 11 | 29 | 80 | |
| 12 | 45 | 96 | |
| 13 | 35 | 83 | |
| 14 | 36 | 87 | |
| 15 | 31 | 80 | |
| Total | 516 | $1,273 | |
If the sole objective of the fuel charge is to approximately recover actual costs incurred each day, would "$2.50 per mile upriver" be a fair formula? What alternative formula might you suggest?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education