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sunk costs

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Joe enjoys fishing & goes out about 20 times per year. One day, Sara told him that fishing is too expensive of a hobby. She thinks he should stop going because she calculated that it costs about %28.75 for every fish he catches because he usually catches about 20 fish per trip. She says it would be much cheaper to buy fish from the market.

Comment on Sara's remarks. Do you agree with her argument? Explain. (below are her cost estimates)

Boat $150.
(cost=$30,000, usable for 10 years, 20 outings per year)
Boat Fuel $45.
Dock Fees & Insurance for the Boat (average per trip) $130.
Travel Expenses to & From the Lake $25.
(100 miles @ $0.25 per mile: gas, oil & tires,
$0.18, & depreciation & insurance, $0.07)
New Fishing Equipment Purchases this Year(pro-rated over 20 trips) $25.
Annual Fishing License $35.
Bait & Miscellaneous Expenses $50
Food $40
Beverages $35
Traffic Fine recieved on the Way to the Lake $40
Total Cost per Trip = $575

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I disagree with her Sara's cost estimate. There are sunk costs she included in her estimates including boat, dock fees and insurances for the boat. These expenses will be ...

Solution Summary

Estimation of Cost is assessed.