Identification of Relevant Costs
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:
Required:
1. Assuming the duck hunting trip Bill has just completed is typical, what costs e 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 d 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 base cost him to shoot the last two ducks Explain
3. Which costs e relevant in a decision of whether Bill should give up bunting? Explain.
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Chapter 11 Solutions
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- 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, $14,000; usable for eight seasons; 14 hunting trips per season Travel expense (pickup truck): 100 miles at $0.49 per mile (gas, oil, and tires-$0.30 per mile; depreciation and insurance-$0.19 per mile) Shotgun shells (two boxes per hunting trip) Boat: Cost, $2,560, usable for eight seasons; 14 hunting trips per season Hunting license: Cost, $30 for the season; 14 hunting trips per season Money lost playing poker: Loss, $38 (Bill plays poker every weekend whether he goes hunting or stays at home) Bottle of whiskey: Cost, $15 per hunting trip (used to ward off the cold) Total cost Cost per duck ($272 + 8 ducks) Complete this question by entering your answers in the tabs below. Required 1 Required 2 49 20 23 2 38 15 $ 272 $34arrow_forwardBill 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, $17,000; usable for eight seasons; 14 hunting trips per season Travel expense (pickup truck): 100 miles at $0.49 per mile (gas, oil, and tires-50.30 per mile; depreciation and insurance-$0.19 per mile) Shotgun shells (two boxes per hunting trip) Boat: Cost, $2,400, usable for eight seasons; 14 hunting trips per season. Hunting license: Cost, $60 for the season; 14 hunting trips per season Money lost playing poker: Loss, $30 (Bill plays poker every weekend whether he goes hunting or stays at home) Bottle of whiskey: Cost, $10 per hunting trip (used to ward off the cold). Total cost Cost per duck ($291 +8 ducks) $ 152 49 25 21 4 30 18 $291 $.36 k Required: 1. Assuming the duck hunting trip Bill has just completed is typical, what…arrow_forwardBill 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; 14 hunting trips per season Travel expense (pickup truck): 100 miles at $0.38 per mile (gas, oil, and tires-$8.26 per mile; depreciation and insurance-50.12 per mile) Shotgun shells (two boxes per hunting trip) Boat: Cost, $2,080, usable for eight seasons; 14 hunting trips per season Hunting License: Cost, $40 for the season; 14 hunting trips per season Money lost playing poker: Loss, $36 (Bill plays poker every weekend whether he goes hunting or stays at home) Bottle of whiskey: Cost, $15 per hunting trip (used to ward off the cold) Total cost Cost per duck ($244 + 8 ducks) Complete this question by entering your answers in the tabs below. Camper and equipment Travel expense Shotgun shells…arrow_forward
- Which one of the following statements is false? Group of answer choices A.Bill drives 20 each way between his home to his office – 40 miles round trip each day. During the day he drives to a client site. He drives a total of 63 miles that day. He may deduct the cost of 43 miles. B.Commuting expenses may be deductible if you are transporting tools. C.A consultant works out of her home. She may deduct the cost of driving to a client’s place of business. D.The expenses of driving between your regular job and a second job are deductible.arrow_forwardSuppose that a surfboard designer owns a building and is renting part of the building's space to a library. Further suppose that because the surfboard designer is the owner, he has the right to make noise during the day while he sands the boards. While the library cannot insist on a quiet environment, it could move to a quieter building. However, rent in the next best building is $350/month more than rent in the noisy building. The surfboard designer can adopt a new technology that eliminates the noise for $275/month. Given this situation, can the library find a private solution with the surfboard designer that will make both better off? What is the minimum and maximum payment the library would make to the surfboard designer to get it to install the noise-reducing equipment? NOTE: Round your answers to the nearest dollar.arrow_forwardMel 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?arrow_forward
- 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 Use the high-low method to determine the "fixed fuel cost" associated with the trolling time, and the "variable fuel cost" associated with running up and down the river.arrow_forwardSalim is financial advisor and consultant. He wishes to go to Salalah during Al Khareef season. He is considering two alternatives. The first one is to drive to Salalah. This option is expected to cost Salim about $150 in fuel cost. Salim also can invite three of his friends to join the trip. Each one of them is expected to pay Salim $40. The other option for Salim is to use Muwasalat bus service. Under this option Salim will also need to rent a car once he arrives to Salalah. The total cost of this option including the bus ticket and the car rental is $ 400. Because the bus trip takes about 11 hours, Salim can use the time to provide consultation services that are expected to earn him $ 500 in total. If Salim decided to drive to Salalah, what would be the differential cost ($) of the that option? a. 400 b . 500 c. None of the given answers d. 150 e. 120arrow_forwardSalim is financial advisor and consultant. He wishes to go to Salalah during Al Khareef season. He is considering two alternatives. The first one is to drive to Salalah. This option is expected to cost Salim about $150 in fuel cost. Salim also can invite three of his friends to join the trip. Each one of them is expected to pay Salim $40. The other option for Salim is to use Muwasalat bus service. Under this option Salim will also need to rent a car once he arrives to Salalah. The total cost of this option including the bus ticket and the car rental is $400. Because the bus trip takes about 11 hours, Salim can use the time to provide consultation services that are expected to earn him $500 in total. If Salim decided to drive to Salalah, what would be the differential cost ($) of the that option? O a. 150 O b. 400 Oc 500 O d. None of the given answers O e. 120 LEVIOUS PAGE NEXT PAGE P Type here to search 日 自 bp 144 ort sc delet %23 %24 & 5 6. 8. backS T. D F pause alt ctriarrow_forward
- Salim is financial advisor and consultant. He wishes to go to Salalah during Al Khareef season. He is considering two alternatives. The first one is to drive to Salalah. This option is expected to cost Salim about $150 in fuel cost. Salim also can invite three of his friends to join the trip. Each one of them is expected to pay Salim $40. The other option for Salim is to use Muwasalat bus service. Under this option Salim will also need to rent a car once he arrives to Salalah. The total cost of this option including the bus ticket and the car rental is $400. Because the bus trip takes about 11 hours, Salim can use the time to provide consultation services that are expected to earn him $500 in total. If Salim decided to drive to Salalah, what would be the differential revenue ($) of the that option? a. None of the given answers O b. 500 C. 40 O d. 150 O e. 120arrow_forwardLisa is a contractor, and she owns a small home renovation company that specializes in kitchen renovations. Lisa fears she has been underbidding her projects, and that translates into lost profits that could help sustain her through slow periods. She is putting together an estimate for a potential client and has determined the following activities: Activity Demo of Existing Space Cabinet Installation Countertop Installation Final bid price Cost Driver $ Square Footage # of Hours Square Footage Rate $3.26 /square foot $205 /hour $12.00 /square foot Estimated Use for Job 520 square feet 8 hours Previously, Lisa was billing at a flat rate of $16 per square foot of the demo space with no additional markup. Lisa would like to add a 20% markup to the cost to arrive at the final bid price. Using Activity-Based Costing (ABC), what is the final bid price for her potential customer? (Round intermediate calculations and final answ to 2 decimal places, e.g. 25,000.25.) 280 square feetarrow_forwardes Kristen Lu purchased a used automobile for $28,600 at the beginning of last year and incurred the following operating costs: Depreciation ($28,600 + 5 years) Insurance Garage rent Automobile tax and license Variable operating cost Relevain ry The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $5,720. The car is kept in a garage for a monthly fee. Average fixed cost per mile Variable operating cost per mile Average cost per mile $ 5,720 $ 3,000 $ 1,500 $780 $ 0.11 per mile Required: 1. Kristen drove the car 22,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.)arrow_forward
- Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning