Idaho Food Processors processes potatoes into french fries. Production requires two processes: cutting and cooking. Direct materials are added at the beginning of the cutting process (potatoes) and at the end of the cooking process (boxes). Conversion costs are incurred evenly throughout each process. Idaho uses the weighted-average method of process costing.

Assume that McDonald’s offers Idaho $ 0.40 per pound to supply restaurants in the Far East. If Idaho accepts McDonald’s offer, the cost (per equivalent unit of production) that Idaho will incur to fill the McDonald’s order equals the April cost per equivalent unit of production. M. A. Keltner, manager of the cooking process, must prepare a report recommending whether Idaho should accept the offer. Keltner gathers the following information from April’s cooking operations:

Rita Mendez manages the cutting process. She reports the following data for her department’s April operations.

Split your team into two groups. Each group should meet separately before a meeting of the entire team.

Requirements
1. The first group takes the role of M. A. Keltner, manager of the cooking production process. Before meeting with the entire team, determine the maximum transferred in cost per pound of raw shoestring fries the Cooking Department can incur from the Cutting Department if Idaho is to make a profit on the McDonald’s order.
2. The second group takes the role of Rita Mendez, manager of the cutting process. Before meeting with the entire team, determine the April cost per pound of raw shoestring fries in the cutting process.
3. After each group meets, the entire team should meet to decide whether Idaho should accept or reject McDonald’soffer.

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IDAHO FOOD PROCESSORS Cooking Department April 2014 Activity and Costs Beginning Work-in-Process Inventory Raw shoestring fries transferred in during April French fries completed and transferred out Ending Work-in-Process Inventory (20% of way through process) Conversion costs within the Cooking Department to start 12,000 12,000 pounds 129,000 pounds 130,000 pounds 11,000 pounds pounds of beginning Work-in-Process Inventory in March Costs added during Apri: $ 576 Direct materials Conversion costs 9,100 15,420 IDAHO FOOD PROCESSORS Cutting Department April 2014 Activity and Costs Beginning Work-in-Process Inventory Potatoes started in April Raw shoestring fries completed and transferred out Ending work-in-Process Inventory (60% of way through process) Costs to start 21,000 pounds of beginning Work-in-Process Inventory 21,000 pounds 121,000 pounds 129,000 pounds 13,000 pounds In March ($1,260 for direct materials, $840 for conversion costs) 2,100 Costs added during Apri: 7,260 12,840 Direct materials Conversion costs