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 quar- ter-inch grid. In the cooking process, the raw shoestring fries are cooked in a bleacher. dried. partially fried at 380F and immediately flash frozen at minus 75F before being dropped into 5-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 through- out each process. Hermiston uses the FIFO method of process costing. Assume that McDonald's offers Hermiston $2 per 5-pound bag to supply restaurants in the Far East. If Hermiston accepts McDonald's offer, the extra cost per equivalent 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: HERMISTON FOOD PROCESSORS Cooking Department April 20XX Activity and Costs Beginning work in process inventory (40% of way through process). Raw shoestring Iries started in April. Ending work in process inventory (30% of way through process). Costs to start the 12.000 pounds of beginning 12.000 pounds 129,000 pounds French fries completed and transferred out. 130.000 pounds 11,000 pounds $ 640 Direct materials Conversion costs. 6.500 15.420 work in process inventory in March. Costs added during April: Lola Mendez manages the cutting process. She reports the following data for her depart- ment's April operations. HERMISTON FOOD PROCESSORS Cutting Department April 20XX Activity and Costs Beginning work in process inventory (40% of way through process) 21,000 pounds Potatoes started in April 121,000 pounds Raw shoestring fries completed and transferred out. 129,000 pounds Ending work in process inventory (60% of way through process) 13,000 pounds Costs to start the 21,000 pounds of beginning work in process inventory in March. Costs added during April: Direct materials Conversion costs $ 2,310 9,680 12,840 Split your team into two groups. Each group should meet separately before a meeting of the entire team. Required 1. The first group takes the role of J. R. Simlott, 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 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 21-11 through 21-14 as a guide to your analysis.) 2. The second group takes the role of Lola 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 21-11 through 21-14 as a guide to your analysis.) 3. After each group meets, the entire team should meet to decide whether Hermiston should accept or reject McDonald's offer.