Calculating costs for a customer order (Learning Objective 4) Hermiston Food Processors in Hermiston, Oregon, processes potatoes into French fries. Production requires two processes: cutting and cooking. The cutting process begins as scalding steam explodes the potatoes’ brown skins. Workers using paring knives gouge out black spots before high-pressure water blasts potatoes through a pipe and into blades arranged in a quarter-inch grid. In the cooking process, the raw shoestring fries are cooked in a bleacher, dried, partially fried at 380°F, and immediately flash-frozen at minus 75°F before being dropped into five-pound bags. Direct materials are added at the beginning of the cutting process (potatoes) and at the end of the cooking process (bags). Conversion costs are incurred evenly throughout each process.
Assume that McDonald’s offers Hermiston $0.40 per pound to supply restau¬ rants in the Far East. If Hermiston accepts McDonald’s offer, the cost (per equiva¬ lent unit) that Hermiston will incur to fill the McDonald’s order equals the April cost per equivalent unit. J. R. Simlott, manager of the cooking process, must prepare a report explaining whether Hermiston should accept the offer. Simlott gathers the following information from April’s cooking operations:

Lola 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 Simlott, manager of the cooking production process. Before meeting with the entire team, determine the maximum trans¬ ferred-in cost per pound of raw shoestring fries the cooking department can incur from the cutting department if Hermiston is to make a profit on the McDonald’s order. (Hint: You may find it helpful to prepare a time line and to use Exhibits 4-10 through 4-13 as a guide for your analysis.)
2. The second group takes the role of 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. (Hint: You may find it helpful to prepare a time line and to use Exhibits 4-10 through 4-13 as a guide for your analysis.)
3. After each group meets, the entire team should meet to decide whether Hermiston should accept or reject the McDonald’s offer.

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HERMISTON FOOD PROCESSORS Cooking Department April Activity and Costs Beginning work in process inventory, April 1 Raw shoestring fries started in April French fries completed and transferred out Ending work in process inventory (30% of way through process), April 30 Costs incurred within the cooking department in March to start the 12,000 pounds of beginning work in process inventory Costs added during April: Direct materials Conversion costs 12,000 pounds 129,000 pounds 130,000 pounds 11,000 pounds $ 576 6,500 15,420