Billy Davidson operates Billys Worm Farm in Mississippi. Davidson raises worms for fishing. He sells a box

Billy Davidson operates Billy’s Worm Farm in Mississippi. Davidson raises worms for fishing. He sells a box of 20 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 return. To evaluate the farm’s performance, he prepared the following production cost report. The Finished Goods Inventory is zero because the worms ship out as soon as they reach the required size. Monthly operating expenses total $ 2,000 (in addition to the costs below).

Requirements
Billy Davidson has the following questions about the farm’s performance during June.
1. What is the cost per box of worms sold?
2. What is the gross profit per box?
3. How much operating income did Billy’s Worm Farm make in June?
4. What is the return on Davidson’s investment of $ 400,000 for the month of June? (Compute this as June’s operating income divided by Davidson’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 Billy’s Worm Farm have had to charge in June to achieve a 2% monthly rate ofreturn?

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BILLY'S WORM FARM Production Cost Report-BROODING DEPARTMENT Month Ended June 30, 2014 Equivalent Units Whole Units Transferred In Direct Materials Conversion Costs UNITS Units to account for Beginning work-in-process Transferred in 9,000 21,000 30,000 Total units to account for Units accounted for: Completed and transferred out Ending work-in-process 20,000 10,000 30,000 20,000 10,000 30,000 20,000 6,000 26,000 20,000 3,600 23,600 Total units accounted for Total Costs Transferred Direct Conversion Costs Materials COSTS Costs to account for In Beginning work-in-process Costs added during period Total costs to account for Divided by: Total EUP Cost per equivalent unit 21,000 46,200 67,200 30,000 2.24 $ 39,940 152,460 192,400 26,000 7.40 5,020 56,340 61,360 + 23,600 65,960 255,000 320,960 12.24 Costs accounted for Completed and transferred out Ending work-in-process 44,800 22,400 67,200 148,000 44,400 192,400 52,000 9,360 61,360 244,800 76,160 320,960 Total costs accounted for