Bradley Wilmer operates Bradley's Cricket Farm in Fairview, Georgia. Bradley's raises about 18 million crickets a month. Most are sold to pet stores at $10.26 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 pro- -cess, 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 approximatelytwo weeks in brooding before being shipped to pet stores. In the brooding process, Bradley's "crickets consume about 16tons of food andproduce 12 tons of manure. Wilmer has invested $375,000 in the cricket farm, and he had hoped to earn a 60% annual rate of return, which works out to a 5% monthly return on his investment. After looking at the farm's bank balance, Wilmer fearshe is not achieving this return. To get more accurate information on the farm's performance, Wilmer bought new accounting software that provides weighted-average process cost information. After Wilmer input the data, the software provided the following reports. However, Wilmer needs help interpreting these reports. Process Costing 297 8 Wilmer does know that a unit of production si a box of 1,000 crickets. For example, ni June's report, the 7,000 physical units of beginning work-in-processinventory are 7,000 boxes (each one of those 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 $8,250 (in addition to the costs that follow). 1-* Bradley's Cricket Farm-Brooding Department Month EndedJune 30 Production Cost Report (part 1of 3) 3 FlowofProduction 4 Units t oaccountfor: 5 Beginning work ni process, June .1 6 Plus: Transferred induringJune. Total physical units toaccount for 9 Units accountedfor: 10 Completed andtransferredoutduring June 11 Plus:Endingworkin process, June30 12 Total physicalunits accounted for *13 Total equivalent units 14 Step 2 :Equivalent Units Transferred- Direct Conversion in Materials Costs 1 Bradley's Cricket Farm--Brooding Department Month EndedJune 30 Transferred- Direct 2 Production Cost Report(part2 o f3 ) Materials 3 Beginning w orkinprocess,June 16,000 34.000 Plus: Costs addedduring June 5 50,970 320005. 5 Total costs toaccountfor 5 66.970 196,000: 5 Divided by: Total equivalent units 37.000 35,000 7 Cost perequivalentunit 1.81 5 . 6 0 8,000 55,000 63,000 30.000 2.10 5 Bradley's Cricket Farm--BroodingDepartment Month EndedJune 30 Transferred- in Direct Materials 27,000 5.60 151,200 8,000 5.60 44, 800 Conversion Costs ProductionCost Report (part 3 of 3) Assignmentof totalcost: Completed and transferred out: 5 Equivalent units completed and transferredout Multiplied by: Cost per equivalent unit Costassignedtounits completed and transferred out 8 9 Endingworkin process: "EquivalentunitsinendingWIP 1 Multiplied by: Cost per equivalent unit 12 Costassignedto units inendingWIP 13 14 Totalcosts accounted for 15 5 27,000 1.81 $ 48,870$ ,s 27,000 2.10 56,700 $ 256,770 S t e p 1: Flowo fPhysical Units 7,000 30,000 37,000 27,000 27,000 10,000 10,000 37.000 37,000 27,000 8.000 35,000 Conversion Costs 27,000 3,000 30,000 Total 58,000 267.970 325.970 Total 10,000 1.81 51' 18,100 3,000 2.10 6,300 : $ Requirements Bradley Wilmer has the following questions about the farm's performanceduring June: 1. What is the cost per box of crickets sold? (Hint: This is the cost of the boxes com- pletedand shipped out of brooding.) .2 What is t h egross profit per box? 3. How much operating income did Bradley's Cricket Farm make in June? 4. Whatis the return on Wilmer's investment of $375,000 for the month ofJune? (Compute this as June's operating income divided by Wilmer'sinvestment, expressed as apercentage.) 5. What monthly operating income would provide a 5% monthly rate of return?What price per box would Bradley's Cricket Farm have had to charge in June to achieve this target monthly rate of return?