Question

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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  • CreatedJanuary 16, 2015
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