Jimmy Jones operates Jimmys Cricket Farm in East Hartford, CT. Jimmy raises about 18 million crickets per month. Most are sold at pet stores at $12.60 per box of 1,000 crickets. Pet stores sell the crickets for 5 cents or 10 cents as live feed for reptiles.

Raising crickets is 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 must 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, Jimmys crickets consume about 16 tons of food and produce 12 tons of manure.

Jimmy has invested $400,000 in the cricket farm, and he hopes to earn a 24% annual return, which works out to be 2% per month. After looking at the farms bank balance, Jimmy is worried he is not achieving the return he wants. Jimmy bought some new software and input data and generated some reports. He needs help interpreting the output.

He does know that a unit of production is a box of 1,000 crickets. Junes report shows 7,000 units of beginning work in process inventory. The Finished Goods Inventory is zero because the crickets ship out as soon as they reach the required size. Monthly operating expenses are $2,000

Required:

1. What is the cost per box of crickets sold?

1. What is the gross profit per box?

1. How much operating income did Jimmy earn in June?

1. What is the return on Jimmys investment of $400,000 for the month of June?

1. What monthly operating income would provide the 2% return Jimmy wants? What does he need to charge per box to accomplish this?

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