Question: Hamilton Food Processors in Hamilton Ontario processes potatoes into french

Hamilton Food Processors in Hamilton, Ontario, 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 half-centimetre grid. In the cooking process, the raw shoestring fries are cooked in a blancher, dried, partially fried at 193°C, and immediately flash-frozen at minus 24°C before being dropped into 5 kg 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 Hamilton $0.40 per kilogram to supply restaurants in the Far East. If Hamilton accepts McDonald’s offer, the cost (per equivalent unit) that Hamilton 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 Hamilton should accept the offer. Simlott gathers the following information for April’s cooking operations from Lola Mendez, who manages the cutting process. Mendez 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.
1. The first group takes the role of Simlott, manager of the cooking production process. Before meeting with the entire team, determine the maximum transferred-in cost per kilogram of raw shoestring fries the Cooking Department can incur from the Cutting Department if Hamilton is to make a profit on the McDonald’s order.
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 kilogram of raw shoestring fries in the cutting process.
3. After each group meets, the entire team should meet to decide whether Hamilton should accept or reject the McDonald’s offer.

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  • CreatedApril 30, 2015
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