YAOVI'S CRICKET FARM Brooding Department Production Cost Report (part 1 of 2) Month Ended June 30 Equivalent Units Flow of Flow of Transferred- Direct Conversion Production Physical In Materials Costs Units Units to account for: Beginning work in process inventory, June 1 Transferred in 7,000 during June Total units to 21,000 account for Units accounted 28,000 for: Completed and shipped out during June Ending work in 19,000 19,000 19,000 19,000 process, June 30 Total physical 9,000 9,000 7,200 3,600 units accounted for Total equivalent 28,000 units 28,000 26,200 22,600A6-63 COST PER UNIT AND GROSS PROFIT ( Learning Objective 5) Yaovi Akpawu operates Yaovi's Cricket Farm in Thunder Bay, Ontario. Yaovi's raises about 18 million crickets a month. Most are sold to pet stores at $12.60 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, 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 2 weeks in brooding before being shipped to pet stores. In the brooding process, Yaovi's crickets consume about 16 tonnes of food and produce 12 tonnes of manure. Akpawu 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, Akpawu fears he is not achieving this return. To get more accurate information on the farm's performance, Akpawu bought new accounting software that provides weighted-average process cost information. After Akpawu input the data, the software provided the following reports. However, Akpawu needs help interpreting these reports. Akpawu 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 the 7,000 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 $2,000 (in addition to the costs that follow).Requirements Yaovi Akpawu 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 Yaovi's Cricket Farm make in June? 4. What is the return on Akpawu's investment of $400,000 for the month of June? (Compute this as June's operating income divided by Akpawu's $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 Yaovi's Cricket Farm have had to charge in June to achieve a 2% monthly rate of return?YAOVI'S CRICKET FARM Brooding Department Production Cost Report (part 2 of 2) Month Ended June 30 Transferred- Direct Conversion Total in Materials Costs Unit costs: Beginning work in $21,000 S 39.940 $ 5,020 S 65,960 process. June 1 Costs added 46,200 156,560 61,480 254,240 during June Total costs to 967.200 $106.500 $56,500 $320.200 account for Divide by total : 28,000 :26,200 : 22,600 equivalent units Cost per $ 2.40 S 7.50 $ 2.50 equivalent unit Assignment of total CO Units completed [19,000 x ($2.40 + $7.50 + $2.50)] $235.600 and shipped out during June Ending work in process. June 30: Transferred-in [9,000 x $2.40] 21.600 Costs Direct materials [7,200 x $7.50] 54.000 Conversion [3,600 x $2.50] 9.000 costs Total ending 84.600 work in process. June 30 Total cost $320,200 accounted for