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, $17,000; usable for eight seasons; 14 hunting trips per season $ 152 Travel expense (pickup truck): 100 miles at $0.38 per mile (gas, oil, and tires—$0.28 per mile; depreciation and insurance—$0.10 per mile) 38 Shotgun shells (two boxes per hunting trip) 30 Boat: Cost, $2,480, usable for eight seasons; 14 hunting trips per season 22 Hunting license: Cost, $30 for the season; 14 hunting trips per season 2 Money lost playing poker: Loss, $28 (Bill plays poker every weekend whether he goes hunting or stays at home) 28 Bottle of whiskey: Cost, $20 per hunting trip (used to ward off the cold) 20 Total cost $ 292 Cost per duck ($292 ÷ 8 ducks) $ 36 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 14 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 six ducks
2 answers:
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Answer:
Net earnings before taxes = $9,300
Explanation:
Provided information, we have
Sales for the period = $20,000
Less: Operating Cost = $8,250
Less: Depreciation = $1,750
Operating income = $10,000
Less: Interest = $10,000 7% = $700
Thus, net earnings before taxes = $9,300
Note: All the expenses including depreciation, and interest are charged before taxes.
Therefore, depreciation and interest has been deducted before charging taxes.