Joe College graduated from a university that is located three hours from the city in which he now works. A loyal alumnus and an avid football fan, Joe always buys season tickets to the football games although his Alma Mater has posted loosing records in each of the last three years. Joe sends a check for $218 to the University by July 1 of every year to cover the cost of two tickets for each of the 7 home games plus $50 for a parking permit. Joe has difficulty finding friends to accompany him to the games. However, he is adamant that he must go to the games because he has paid for the tickets. Friends insist that the cost of the tickets is a sunk cost and that the decision should be based on future costs that would be different between alternatives – going to the game and not going to the game. Friends have calculated the fuel for the 6 hour round trip costs $15 and two meals while away from home for the game can easily cost $30 or more. Write a memo to Joe outlining the relevant costs associated with a trip to the game.
Problem 5
Joe College graduated from a university that is located three hours from the city in which he now works. A loyal alumnus and an avid football fan, Joe always buys season tickets to the football games although his Alma Mater has posted loosing records in each of the last three years. Joe sends a check for $218 to the University by July 1 of every year to cover the cost of two tickets for each of the 7 home games plus $50 for a parking permit. Joe has difficulty finding friends to accompany him to the games. However, he is adamant that he must go to the games because he has paid for the tickets. Friends insist that the cost of the tickets is a sunk cost and that the decision should be based on future costs that would be different between alternatives – going to the game and not going to the game. Friends have calculated the fuel for the 6 hour round trip costs $15 and two meals while away from home for the game can easily cost $30 or more. Write a memo to Joe outlining the relevant costs associated with a trip to the game.
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