Anthony Zelinski operates Anthony's Cricket Farm in Atlanta, Georgia. Anthony's raises about 18 million crickets a month. Most are sold to pet stores at $9.23 for a box of 1,000 crickets. Pet stores sell the crickets for $0.05 to $0.10 each as live feed for reptiles.
Raising crickets requires a two-step process: incubation and brooding. In the first process, incubation, employees place cricket eggs on mounds of peat moss to hatch. In the second process, employees move the newly hatched crickets into large boxes filled with cardboard dividers. Depending on the desired size, the crickets spend approximately two weeks in brooding before being shipped to pet stores. In the brooding process, Anthony's crickets consume about 16 tons of food and produce 12 tons of manure.
Zelinski has invested $420,000 in the cricket farm, and he had hoped to earn a 53.4% annual rate of return, which works out to a 4.45% monthly return on his investment. After looking at the farm's bank balance, Zelinski fears he is not achieving this return. To get more accurate information on the farm's performance, Zelinski bought new accounting software that provides weighted-average process cost information. After Zelinski input the data, the software provided the following reports. However, Zelinski needs help interpreting these reports.
Zelinski does know that a unit of production is a box of 1,000 crickets. For example, in June's report, the 7,000 physical units of beginning work in process inventory are 7,000 boxes (each one of these boxes contains 1,000 immature crickets). The finished goods inventory is zero because the crickets ship out as soon as they reach the required size. Monthly operating expenses total $19,050 (in addition to the costs that follow).

Requirements
Anthony Zelinski has the following questions about the farm's performance during June:
1. What is the cost per box of crickets sold? (Hint: This is the cost of the boxes completed and shipped out of brooding.)
2. What is the gross profit per box?
3. How much operating income did Anthony's Cricket Farm make in June?
4. What is the return on Zelinski's investment of $420,000 for the month of June? (Compute this as June's operating income divided by Zelinski's investment, expressed as a percentage.)
5. What monthly operating income would provide a 4.45% monthly rate of return? What price per box would Anthony's Cricket Farm have had to charge in June to achieve this target monthly rate of return?

Transcribed Image Text:

Anthony's Cricket Farm–Brooding Department Step 2: Equivalent Units Step 1: Month Ended June 30 Production Cost Report (part 1 of 3) Flow of Production Units to account for: Beginning work in process, June 1 Plus: Transferred in during June Total physical units to account for Flow of Physical Transferred- Conversion Direct Materials Units in Costs 37,000 44,000 Units accounted for: Completed and transferred out during June Plus: Ending work in process, June 30 Total physical units accounted for Total equivalent units 34,000 6,000 34,000 34,000 1 10,000 44,000 44,000 40,000 37,000 Anthony's Cricket Farm-Brooding Department Month Ended June 30 Transferred- Direct Conversion Production Cost Report (part 2 of 3) Beginning work in process, June 1 Plus: Costs added during June Total costs to account for Divided by: Total equivalent units Cost per equivalent unit Materials in 15,000 51,000 66,000 44,000 1.50 Total 61,460 273,000 334,460 41,000 $ Costs 5,460 169,000 53,000 58,460 37,000 210,000 40,000 5.25 1.58