Case 1. Bobby Jones operates Bobby's Cricket Farm in Baton Rouge, Louisiana, Bobby's raises about 18 million
Question:
Case 1. Bobby Jones operates Bobby's Cricket Farm in Baton Rouge, Louisiana, Bobby's raises about 18 million crickets a month. Most are sold to pet stores at $13 for a box of 1,000 crickets. Pet stores sell the crickets for 5-10 cents 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 shipment to pet stores. In the brooding process, Bobby's crickets consume about 16 tons of food and produce 12 tons of manure. Jones has invested $400,000 in the cricket farm and he had hoped to earn a 24% annual rate of return, which works out to a 2% monthly return on his investment. After looking at the farm's bank balance. Jones fears he is not achieving this return. To get more accurate information on the farm's performance. Jones bought new accounting software that provides process cost information. After Jones input data, the software provided the reports on the next page. However. Jones needs help interpreting these reports. Jones does know that a unit of production is a box of 1.000 crickets. For example, in June's production cost report, the 7,000 physical units of beginning work in process inventory are 7.000 boxes (each one of the 7,000 boxes contains 1,000 immature crickets). The finished goods inventory is zero as the crickets ship out as soon as they reach the required size. Monthly operating expenses total $1.000. Required Bobby Jones 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 Bobby's Cricket Farm make in June? 4. What is the return on Jones' investment of $400,000 for the month of June? (Compute this as June's operating income divided by Jones' $400,000 investment, expressed as a percentage.) 5. What monthly operating income would provide a 2% monthly rate of return? What price per box would Bobby's Cricket Farm have had to charge in June to achieve a 2% monthly rate of return? BOBBY'S CRICKET FARM Brooding Department Month Ended June 30, 20XX Equivalent Units Flow of Production Flow of Physical Units Transferred In Direct Materials Conversion Costs Units to account for: Beginning work in process inventory 7.000 Transferred in during June.. 21,000 Total units to account for.. 28.000 Units accounted for: Completed and shipped out during June: From beginning inventory. 7,000 1,400 Started and completed during June.. 12.000 12,000 12.000 4.200 12,000 Ending work in process. June 30 9.000 9,000 7.200 3,600 Total physical units accounted for. 28.000 Equivalent units. 21,000 20.600 19,800 Unit costs: Beginning work in process. May 31. Costs added during June. Divide by equivalent units Cost per equivalent unit... Total cost to account for BOBBY'S CRICKET FARM Brooding Department Production Cost Report (FIFO Method) Month Ended June 30, 20XX Transferred In Assignment of total cost: Units completed and shipped out: From beginning work in process. May 31 Costs added during June: Direct materials. Conversion costs. Total completed from beginning inventory Units transferred in from Incubation and completed during June. Total cost shipped out Ending work in process, June 30: Transferred-in costs... Direct materials. Conversion costs Total ending work in process, June 30 Total cost accounted for..... Direct Materials Conversion Costs Total $46,200 +21,000 $156,560 $2.20 +20,600 $7.60 $51.480 +19,800 $ 74,740 254,240 $2.60 $328.980 $ 74.740 [1.400 x $7.60] 10.640 [4.200 x 52.60] 10,920 96,300 [12,000 ($2.20 + $7.60 + $2.60)] 148,800 245,100 [9.000 x $2.20] 19.800 [7.200 x $7.60] 54,720 [3.600 x $2.60] 9,360 83,880 $328,980
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Accounting
ISBN: 9780130906991
5th Edition
Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones