-Bill has just returned from a duck hunting trip. He has brought home eight ducks. Bills friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John has presented him with the following cost estimate per duck:

Camper and equipment: Cost, $15,800; usable for eight seasons; 10 hunting trips per season $ 197.50 Travel expense (pickup truck): 100 miles at $0.46 per mile (gas, oil, and tires$0.28 per mile; depreciation and insurance $0.18 per mile) 46.00 Shotgun shells (two boxes) 35.00 Boat: Cost, $2,720, usable for eight seasons; 10 hunting trips per season 34.00 Hunting license: Cost, $60 for the season; 10 hunting trips per season 6.00 Money lost playing poker: Loss, $20 (Bill plays poker every weekend) 20.00 Bottle of whiskey: Cost, $15 (used to ward off the cold) 15.00 Total cost $ 353.50 Cost per duck ($353.50 8 ducks) $ 44.19

Required: 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?

2.

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?

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(Prepared from a situation suggested by Professor John W. Hardy.) Granite City Meat Processing Corporation is a major processor of beef and other meat products. The company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks as is or to process them further into filet mignon and New York cut steaks.

Management believes that a 1-pound T-bone steak would yield the following profit:

Wholesale selling price ($4.20 per pound) $ 4.20 Less joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product 3.55

Profit per pound $ 0.65

As mentioned above, instead of being sold as is, the T-bone steaks could be further processed into filet mignon and New York cut steaks. Cutting one side of a T-bone steak provides the filet mignon, and cutting the other side provides the New York cut. One 16-ounce T-bone steak cut in this way will yield one 4-ounce filet mignon and one 10-ounce New York cut; the remaining ounces are waste. The cost of processing the T-bone steaks into these cuts is $0.26 per pound. The filet mignon can be sold for $6.60 per pound, and the New York cut can be sold wholesale for $5.20 per pound.

Required:

1.

Determine the profit per pound from processing the T-bone steaks further into filet mignon and New York cut steaks. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

2.

Would you recommend that the T-bone steaks be sold as is or processed further?

T-bone steaks should be sold. T-bone steaks should be processed further.