# Hank, Bill, Dale, and Boomer are friends who live in northern Maine. Being frugal, they use wood-burning

## Question:

Hank, Bill, Dale, and Boomer are friends who live in northern Maine. Being frugal, they use wood-burning stoves in their homes to provide heating during winters. The friends harvest timber from land that Boomer owns. Each friend pays Boomer for the raw timber they consume at the prevailing market rate.
Each winter, the friends rent an industrial-strength hydraulic log-splitter to cut the timber into smaller logs that would fit a wood stove. Hank typically uses up 1/2 cord (the unit of measure for logs). Bill and Dale typically consume an entire cord. Boomer, who has a large house, splits 1.5 cords. Fully utilized, the log-splitter, which costs \$200 to rent for the day, could split five cords of wood per day. Hank, Bill, and Boomer split the majority of their own logs; however, the friends typically help Dale split his logs because he has a tendency to throw his back out when lifting the logs into the machine.
The friends use Bill’s trailer to haul the log-splitter from the rental store and from house to house. At day’s end, the friends accompany Bill to return the splitter to the rental store, after which they adjourn for some “refreshments” at a nearby bar.

Required:
a. What costs would you allocate in this setting? Should Bill be compensated for the use of his trailer? Should the friends add the cost of helping Dale to the cost pool?
b. Discuss two ways the friends could allocate the cost(s) you identified in part (a). What are the costs and benefits of each method?

Fantastic news! We've Found the answer you've been seeking!