CRITICAL THINKING Decision Case 20-1 Billy Davidson operates Billy's Worm in Mississippi. Davidson raises worms for He sells a box of worms for $12.60. Davidson has invested $400,000 in the worm farm. He had hoped to earn a 24% annual rate of return (net income divided by total assets), which works out to a 2% monthly return on his investment. After looking at the farm's bank balance, Davidson fears he is not achieving this cost return. To evaluate the farm's performance, he prepared the following production as report. The Finished Goods Inventory is zero because the worms ship out as soon to they reach the required size. Monthly operating expenses total $2,000 (in addition the below). BILLY"S WORM FARM Production Cost DEPARTMENT Month Ended June 30, 2016 Equivalent Units Conversion Direct Whole Transferred Costs Units Units to account for: Beginning work-n-process 21,000 30,000 Total units to account for Units accounted for: 20,000 Completed and transferred out 10,000 Ending work-n-process 23,600 26,000 30,000 Total units accounted for Conversion Transferred Direct Materials COSTS Costs to account for: 5,020 39,940 21,000 Beginning work-in-process 56,340 152,460 46,200 Costs added during period 61,360 67,200 92,400 Total costs to account for 23,600 Divided by Total EUP 26,000 Cost per equivalent unit Costs accounted for: 52,000 148,000 44,800 Completed and transferred out 44,400 22,400 Ending work-in-process 67,200 192,400 61,360 Total costs accounted for Total Costs 65,960 255,000 244.800 76,160 $320,960