Florek Inc Required:
A

question 25

Essay

Florek Inc. allocates joint costs by using the net-realizable-value method. In the company's Chicago plant, products 1 and 2 emerge from a joint process that costs $310,000. Product 2 is then processed at a cost of $320,000 into products 3 and 4. Data pertaining to 1, 3, and 4 follow.
$\begin{array} { l l l l } & \underline { 1 } & \underline { 3 } & \underline { 4 } \\\text { Costs beyond split-off } & \$ 30,000 & \$ 12,000 & \$ 18,000 \\\text { Selling price } & 30 & 34 & 60 \\\text { Pounds produced } & 10,000 & 2,000 & 3,000\end{array}$ Required:
A. Allocate the $320,000 processing cost between products 3 and 4. Round to the nearest whole dollar.
B. From a profitability perspective, should product 2 be processed into products 3 and 4? Show your calculations.
C. Assume that the net realizable value associated with 2 is zero. How would you allocate the joint cost of $25310,000?

---

Definitions:

Antitrust Laws

Legislation enacted to prevent anti-competitive practices, promote fair competition, and protect consumers from monopolies and cartels.

Illegal

Activities or actions that are forbidden by law and subject to criminal penalties or fines.

Fixing Prices

Illegally setting the price of goods or services, rather than allowing them to be determined naturally through free-market competition.

Economic Competition

The situation in which different companies or entities vie for the same customers or market share in an industry, influencing prices, product quality, and innovation.